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Bulletin

Hides and skins market overview

Published: 19 Dec, 2018

In most of the Western countries we entered the last business week of the year, as the Christmas and New Year holidays will see most companies shut or with limited opening starting December 21 and until January 2. In Europe, this is normally considered low season in terms of hides and skins procurement, and much like the middle of the summer, tanners have their eyes set more on vacation time than raw materials. On the other hand, these are the days of maximum mismatch between the throughput from abattoirs, up because of the approaching festivities, and hide sales. This period was used in the past to negotiate prices and bargain good deals, when strategic stocks and being “ahead of the game” was important for tanners. While this still holds partially true, it has also lost much of its significance this year, in the face of rock-bottom prices (still sliding in some origins) and uncertain leather demand for the year to come.

“Patchy”, “slow” and “quiet” are adjectives that traders use to describe the market these days. Some business is there, but not enough to stabilise prices or offer optimism for the beginning of the new year. Rather, more often than not, orders can be booked only after (further) price concessions.

In the key producing regions mostly oriented towards the Far East market, including the U.S., Brazil and Australia, the situation is not much different. Prices are still struggling to find a bottom after a long spell of declines, but pressure remains unrelenting from the abundant availability, competition and weak demand. In the U.S., some sectoral indicators suggest that the herd expansion may top in 2019, but as long as the beef value-chain remains on the level of profitability seen this year, it is unlikely that this will reflect in declining slaughters. If, because of this, raw hide sales are less of a concern for packers in the U.S. and Brazil, back in Europe the beef market is not enjoying the same degree of buoyancy, with slaughterhouses adapting only slowly to the changing realities of the hide market. This has led to a widening gap of competitiveness for European hides sold overseas, but also loss of competitivity within the market itself. Only the proximity to the Italian tanning hub, long standing business relations, and the quality edge offered by (many) European hides, have prevented a more acute crisis.

Finally, for the first time in memory, 2018 has been a year when talk of hides being disposed of is increasingly being heard. Lower grades and split prices have become so low, and demand so limited, that it is no longer profitable to process each and every available hide, as it was in the past. Some specialised traders and production units have shut down or are in the process to do so. And more in general the situation is forcing a restructuring of the hides trade, where marginal actors or those in the “wrong” supply-chains are pushed out of the market, leaving only those more financially sound or better positioned to contend the trade. With these premises, it is quite likely that going into 2019 we will witness a continuation of the current trends. To subscribe click here.


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