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Leatherbiz Market Intelligence executive summary: • • • • •
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A possible Ukraine peace deal could briefly lift consumer confidence Long-term stability remains uncertain Tanneries in Europe are struggling to recruit skilled staff and to attract younger people into the industry Bovine hides remain oversupplied, with more material now being diverted to collagen production Beyond weak demand, the lack of creativity in identifying new applications for leather as a highly successful and versatile material exacerbates the situation Meaningful progress will require joint initiatives, with leather users and tanneries working together.
MARKET INTELLIGENCE
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roposals for a potential peace agreement in Ukraine are attracting much attention. Any form of peace agreement, regardless of how painful the concessions might be, would initially generate a positive impulse for overall consumer sentiment in Europe. But how long any peace agreement might last remains to be seen. The biggest challenge will likely be restoring some level of mutual trust between all parties. The war continues to weigh heavily on the consumption of leathergoods, and therefore a peace agreement could initially generate a noteworthy positive impulse for our industry. Reconstruction and a return to normal life in Ukraine would send a strong signal, and the lifting of sanctions against Russia would likely provide substantial momentum for the leather industry. However, it remains unclear who would ultimately benefit most and what the share of the European leather industry would be. When looking at the current day-to-day realities, it is difficult to identify major changes in the market situation along the leather supply chain. Within the industry, the most notable event was the announcement that a well-known tanner in Austria will soon cease production at its site there. This will not surprise regular readers, yet it still carries emotional weight when a long-established and once successful tannery voluntarily decides to close a location. Official and detailed information is still missing, but the measures for closure have already been initiated and are no longer a secret. The decision may have been easier for the owners because viable perspectives for employees and the property have apparently emerged, making the economic decision more straightforward. Nonetheless, the conclusion
remains that closing the site was assessed as offering a better long-term outlook than continuing production. When considering this decision as an example, it becomes clear that the long-term outlook is shaped not only by the current challenges in leather demand but also by other factors that forward-looking entrepreneurs must consider. Increasingly, arguments are emerging that go beyond the immediate European market situation. General conditions must also be taken into account: bureaucracy, energy costs, additional regulatory requirements, and the continuous migration of customers to other regions. In addition, many tanneries report difficulties in attracting qualified staff for technical and administrative roles. It may be argued that some companies have not sufficiently prepared for this, but it is also true that it becomes more difficult each year to attract young talent to a career in a tannery. Training is also becoming increasingly challenging. The profession of tanner or leather technician requires the acquisition of varied hands-on experiences across many processes. The growing industrial structure makes gaining such experience more difficult, and many processes are increasingly handled by chemical and machinery suppliers. The underlying craftsmanship and creative aspects of leather production are often overshadowed by process optimisation and automation. Furthermore, the availability of chemicals and machinery could also become a critical bottleneck in Europe, with many ideas failing simply because desired essential components are not reliably accessible. This had long been an advantage of the Italian tanning districts, but according to young professionals from the region, opportunities are increasingly limited even there. True craftsmanship is now mostly
practiced only in small or micro enterprises. On a broader level, the situation regarding the European Deforestation Regulation (EUDR) cannot be overlooked. The European Parliament will soon have to decide whether to implement the regulation in its current form on January 1, 2026, or to postpone it by at least one year. It is difficult to imagine that the EUDR, in its present scope, is implementable for all products. Some member states’ belief that this is feasible remains puzzling. The discussion is no longer about substantive issues, which have been neglected for nearly a decade, but instead about principles, ideology and the political risk of losing face. For many small and medium-sized tanneries, the extensive documentation and verification requirements could lead to significant cost burdens and administrative overload like we saw already with voluntary certifications. The Supply Chain Act also plays a role, as it highlights how the global balance of power has shifted. Europe’s preferences and expectations are increasingly disregarded by many trade partners. Insisting on strict European-only standards can have farreaching consequences, including in areas such as energy supply, where many producing countries no longer feel compelled to adapt to European expectations. Without a significant degree of pragmatism, stabilising Europe’s economic development will be difficult in the coming years. The problems in the leather pipeline might be an indicator of this. Many discussions continue to revolve around the future development of raw materials markets, with a particular focus on the bovine hide market. While slaughterhouses aim to stabilise and maintain the value of their by-products, many leather users question how long the current oversupply can be ignored. The idea that tanneries should receive hides for free as waste material is just as unrealistic as the assumption by meat producers that the situation is merely temporary. With declining leather demand, significant stock levels have accumulated at various stages of the supply chain, and many of these inventories cannot find buyers, even at minimal prices. Beyond weak demand, the lack of creativity in identifying new applications for leather as a highly successful and versatile material exacerbates the situation. Meaningful progress will require joint initiatives from leather users and tanneries. One factor that has influenced the market more recently is the increasing use of bovine hides for protein production. What used to be