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Leatherbiz Market Intelligence executive summary: • • • •
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Leather is still not a must-have, but an optional product Leather demand was already shrinking before ‘Liberation Day’ on April 2 Tariffs, the war in Ukraine, the loss of consumer confidence, and the increase in uncertainty are currently determining consumer sentiment The prices for US raw materials are currently having to come down owing to the tariffs and are exerting corresponding price pressure on many other origins Pressure on prices for consumer goods made of leather will continue to increase accordingly The fundamentals have only deteriorated further as a result of trade policy. An improvement can only come from a reassessment of leather as a material.
MARKET INTELLIGENCE
T
he circumstances that have kept the global economy on tenterhooks since Donald Trump took office for the second time in January are having a greater impact on the situation in the leather industry than events and changes that are developing within the industry itself. This has accelerated again since April 9 with the imposition of new tariff levels by the US. This means we are now having to focus more on macroeconomics and international politics than on developments along the leather supply chain. In fact, not much has actually changed in the basic parameters of the leather supply chain since the beginning of January. There is still not enough demand to keep all leather factories busy. We celebrated World Leather Day on April 26. Of course, any activity that endeavours to improve the image of leather and revive understanding for the material is praiseworthy. But if you use the search engines to look up World Leather Day 2025, you will realise that even after several years, it is still an event for the industry itself. One more general comment. At the moment, the European Commission is boasting about its adaptation to the EUDR and claims that the change will achieve a 30% reduction in bureaucracy costs for those affected in the EU. Of course, these are once again grand announcements and headlines intended to cover up failure in the matter. A poorly crafted law will not be improved by making a few cosmetic changes and then claiming that these will cut red tape by 30%. As far as the leather industry is concerned, we
can only refer to a letter from a large number of associations, which was addressed to Commission president, Ursula von der Leyen, at the beginning of April. The problem with the deforestation regulation lies essentially in the fact that a basically good intention is implemented completely free of any expertise. Anyone who has taken a closer look at the facts will realise that the wishes, ideologies and arguments of NGOs can be found throughout the text of the regulation, which is probably due to the fact that the origin and the time of this regulation were still shaped by a social mainstream that was more concerned with ideology than with objective facts. The core statements in the letter to Ursula von der Leyen regarding the leather supply chain deserve support. The Commission should remove hides, skins and leather from the scope of the regulation on the basis that they are not a driver of deforestation. It should remove sheepskin and goatskin products from any list of products for consideration for inclusion during the review process. It is also explained in detail in the letter that this is not just about the economic interests of an industry. It is also the case that including these products in the first place was nonsensical. We don’t need to go into the details again, but one of the main problems with the regulation is simply that different products and regions have been mixed together in a common regulatory cocktail, which is neither correct nor applicable for large parts of the leather supply chain. However, anyone familiar with EU bureaucracy will know that, in the best of all cases, further cosmetic corrections can possibly be expected. Of course, it would be a miracle if
the leather industry were exempted in the end, or even that the entire regulation could be repealed or completely redrafted. Let us now turn to the effects of current US trade policy. Mercantilism is nothing new and has always taken place in international trade relations. Seen in this light, the problem at the moment is not President Donald Trump’s intentions to reorganise trade relations between the US and other countries. The problem with him and his administration is that they clearly do not understand or do not want to understand the complexity of their decisions. In addition to the issue of tariffs, the main problem at the moment lies much more in the uncertainty and therefore the inability to make decisions for long supply chains. This particularly affects our industry, which can have very long supply chains from the raw material to the finished product. At the moment, the focus is of course on the tariffs between China and the US, which have almost completely paralysed trade relations for this part of the leather supply chain. If you consider that around 30% of the cattle hides produced in the US regularly go to buyers in China, you can already see the impact this is having. If we then take the export of finished leather products from China to the US as an example, it becomes clear that large gaps in the supply of various products will appear. This applies to furniture and to many other consumer goods. We do not want to go into analysing the impact on individual products at this point. However, it is clear that every day that there is confusion between China and the US, entire logistics chains are broken. More than three weeks have already passed and, in addition to production, the international transport chain is slowly beginning to feel the effects of the problems. More and more ships are no longer being unloaded, the planning of transport routes across the Pacific is almost impossible and there are reports from China alone that over 100 ships loaded with exports have already been stopped. Anyone who remembers the times of covid19 will know how long it can take until a certain level of supply security is guaranteed again. The individual exemptions granted by Mr Trump for individual products are also of little help, as ships are not only loaded or unloaded because of individual products and containers. Either way, deliveries between China and the US will remain impaired for leather products for some time, which ultimately does not help the leather products business. What solutions can be found for the problems? We can perhaps begin by noting the following. Approximately one-third, around 200,000 units, of the weekly US production of