DELIVERED TO YOU BY EMAIL AND VIEWABLE ACROSS ALL PLATFORMS TUESDAY, DECEMBER 17 2024
Leatherbiz Market Intelligence executive summary: • • • • •
• • •
There is a supply of raw material that has not been covered by the physical demand for leather for many years This realisation is not new, but it has been continuously ignored and not solved There are many who support certification and see it as an effective means of improvement But if certification brings efficiency gains that fall short of the associated cost increases, then some serious thought is needed Even if all certifications were abolished and the legal requirements and bureaucracy relaxed, it would not solve the European leather industry’s problems The damage is simply already far too great and can no longer be changed quickly The year is not ending on a positive note For many leather producers, it has been a year of disappointment and great difficulty, and the hopes repeatedly expressed for an improvement have not materialised in most cases.
MARKET INTELLIGENCE Macroeconomics
T
he news that overshadowed everything else in the last two weeks was about the end to the dictatorship in Syria after years of oppression and torture. Brutal dictatorships are only ever temporary regimes. The only problem for their victims is the length of time it can take for them to end. Much has changed now. However, we still don’t know exactly what the consequences will be in the end. First of all, it is important to achieve stability in the country and possibly offer many refugees the opportunity to return to their homeland. It is clear that the Chinese government is currently very concerned about the country’s economy. Distraction outside the country has always been a method of diverting the focus of the population's interest. Nevertheless, further reports have been published that the government is planning further stimulus measures for the economy. News about meetings of the party leadership to discuss the economic situation also clearly show that it is recognised that the promise of economic advancement is still of central importance in the country. In the world and in the US, eyes are now turning to the appointments to key ministerial and administrative posts that will follow Mr Trump’s inauguration on January 20. Many names are causing head-scratching and the almost daily new announcements regarding the introduction of tariffs, the
withdrawal of the US from NATO or even the rumours about a possible invitation to the ceremony for China’s President Xi give the impression of being more about entertainment than about serious politics. The world has already survived four years of Mr Trump and it will survive this time too. It will definitely not be boring. The central banks in Switzerland and the EU have cut interest rates further and the Federal Reserve in the US is expected to follow. The currently stable inflation rates have ensured that market expectations have been met. The only question at the moment is whether and to what extent this will continue. Due to falling interest rates and further expectations that this cycle is not yet over, the stock markets rose to further record highs. The big technology stocks and the overarching theme of artificial intelligence are still driving the markets forward. The price of gold is changing very little at the moment and somehow you get the feeling that many investors are currently debating whether gold or cryptocurrencies have more potential as a long-term safety net, especially if further action is taken by many countries to ease dependency on the US dollar as the global anchor currency. The US dollar initially weakened somewhat, only to trend firmer again at the end of last week. Here, too, the focus is initially on the outlook for the interest rate markets, but also on the unstable economic development in Europe.
Market Intelligence In this issue and in recent weeks, the Leather Pipeline has focused more on the raw materials markets. Having focused more on developments in the consumer goods markets and the use of leather as a material in recent months, we are now turning our attention back to the question of what to do with the bovine hides that are a by-product of meat production. In recent years, there have been repeated images of cattle hides that could no longer find a market and therefore simply had to be buried. There have been recoveries, but no real has happened for a long time. It is not necessarily noticeable because the large producers have always found temporary solutions. However, in the regions where collection and processing is a logistical challenge and associated with high costs, hides were hardly ever recovered for leather production. Weak consumption, geopolitical risks and the departure of mass users meant that sales markets for leather and finished leather products continued to shrink. At times, this was repeatedly masked by special developments. These included the price jumps for collagen, speculative activities and the mere maintenance of production capacity in the hope that the situation would improve. The economic crisis in combination with the property crisis in China, the collapsing markets in Russia and, of course, the automotive industry’s increasing move away from leather as a material for seat covers have played a decisive role. The fashion shift away from formal shoes towards casual and comfortable footwear also left its mark. Even in classic sports footwear (football boots, for example), leather has slowly but surely been replaced. All in all, neither the luxury sector, which was undoubtedly growing until a year ago, nor the huge success that sports brands have had with retro sneakers in the last year were able to compensate for the decline. The facts are relatively simple. There is a supply of raw material that has not been covered by the physical demand for leather for many years. This realisation is not new, but it has been continuously ignored and is not yet solved. Many in the supply chain have not wanted to accept it as a general problem, but have reacted to it in a fragmented and individualised way. All warnings have been thrown to the wind and the discussion is essentially limited to things that cannot be done rather than searching