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Leatherbiz Market Intelligence executive summary: • • •
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Political instability continues to create uncertainty across the global leather sector Leather demand is shrinking, prices are falling and producers are struggling to adapt The European leather industry’s profitability has eroded since around 2015, worsened by a range of factors including covid-19, high energy costs and regulatory burdens AI tools are emerging for defect detection but have yet to deliver major commercial benefits Short-term prospects depend on new orders before year-end So far, any optimism about a recovery in 2026 remains unsupported by order volumes.
MARKET INTELLIGENCE
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he past two weeks in the leather pipeline have been marked by increased uncertainty. This uncertainty continues to stem largely from general instability in the political arena. Policies and statements from the White House are having a tangible impact on many economic and business decisions. This is not the only issue, or even the main issue, currently facing the leather sector. We are presently in a phase that is likely to have a destructive effect. There are too many different factors hindering production and the use of leather. Leather is no longer being used sufficiently as a material in consumer goods production. As a result, the market for leather is shrinking and this is accompanied by falling prices. In theory, lower prices should stimulate demand, eventually leading to renewed growth and rising prices. In practice, reality has looked very different for quite some time. Leather demand continues to decline, capacity adjustments are slow and delayed, prices are falling, and the ability to adapt costs and capacity appropriately is becoming increasingly exhausted. Otherwise, the development could almost be traced straight from an economics textbook: when prices fall, those with the highest costs and lowest returns are the first to face the most severe consequences. This topic has been discussed for some time, and we have repeatedly highlighted this issue in relation to the European leather industry. Some observers rightly note that no dramatic consequences have yet occurred. However, looking more closely at Europe, that is only partly true: several adjustments have indeed taken place, even if they were not directly the result of corporate decisions or market forces.
Consider, for example, the reduction of production capacity caused by the fire at Ecco’s tannery in the Netherlands in May, the voluntary closure of Vitelco’s leather factory in the same country in April, and the reduced capacity utilisation at a major contract tannery. Together, these already represent a significant decline in available capacity in Europe in 2025. Additionally, there have been voluntary production cuts throughout the European leather industry. Although no precise figures are available, it is clear that substantial unused capacity exists in Europe’s major tanning centres, either because there is no market for certain products or because production has become uneconomical. Looking at industrial history in the western world, there are many parallels with past overcapacities. Time and again, decisionmakers failed to recognise the signs early enough. For outsiders, such analysis is easy, but the reality is that businesses must confront their situation clearly and rationally, not guided by hope, but by a serious assessment of their individual circumstances. Those who can demonstrate sound reasoning and clear strategies to respond successfully to these conditions will ultimately see better times again. Anyone familiar with the history of the European leather industry knows that similar situations have occurred multiple times over the past decades, for example in the 1960s, 1970s and 1980s. However, the industry’s adjustments in the decades following World War II occurred in much shorter cycles than they do today. We have now experienced more than 30 years without major structural crises in the European leather industry. The opening of eastern European markets and rising
prosperity created new demand faster than local competitors could emerge. This was reinforced by the growing popularity of European quality brands in consumer goods. Finally, a boom in automotive and luxury leathers and leathergoods marked the end of a long period of strong profitability in Europe. No one can pinpoint the exact date of the turning point, but it likely occurred between 2015 and 2019. The rapid success of plasticbased sneakers and the effects of the covid19 pandemic, followed by subsequent short-lived recoveries may have masked the underlying trend but did not reverse it. Since the end of the pandemic, negative developments have accelerated, exacerbated by the war in Ukraine, sanctions, rising energy costs and, more recently, US trade policies. Labour shortages, sharply increasing wages, a temporary social trend away from animal products, self-inflicted certifications and audit charges and an industry-stifling EU regulatory approach have all undermined the economic foundation of large parts of the European leather supply chain. Critics may say we have been painting too dark a picture for some time, as no major disruptions have yet materialised. After all, all factories reopened after the summer break, the Milan trade fair saw nearly the same number of exhibitors, and no one has publicly discussed plant closures. From this perspective, one could argue that a negative outlook is counter-productive. However, that might be part of Europe’s broader problem: a general unwillingness to face reality and a preference to promote the ‘think positive’ mindset as a guiding principle. The line between negativity and realism, however, is very thin. Even now, many still claim that 2026 will mark a turnaround. So far, this is not supported by growing order volumes. What is clear, however, is that capacity utilisation and overall business conditions in the European leather industry remain weak. Some of the missing volume in Europe has undoubtedly shifted to south and south-east Asia for cost reasons. China, however, is not the solution either. Its market also faces difficulties, although for different reasons. For European production, this means that the minimum prices needed by manufacturers to operate profitably are no longer realistically achievable. Furthermore, several downstream leather processors have relocated their operations abroad. Markets within Russia’s sphere of influence remain largely inaccessible. If costs, logistics and delivery times continue to constrain market potential, the situation will not improve anytime soon.