Hide demand outstrips supply
Published: 09 Oct, 2020
There are very few positives to draw from the world Covid-19 problems, but perhaps one piece of good news for the hide supply industry is that after a long-time demand is outstripping supply within certain segments of the hide industry. Slaughter rates in almost all origins are well below the normal levels.
As long as movements and travel continues to be restricted, or severely hampered, the restaurant and hospitality trades will suffer. The consequence of this has had a twofold positive impact upon the global hide trade. Firstly, farmers are able to take the time to replenish much depleted herd stocks, which had in many cases been cut to dangerously low levels, following years of increasing beef demand. Secondly, lower beef demand leads to fewer hides entering the supply chain, meaning hides are suddenly in short supply; it has only taken a rise in Chinese domestic finished leather requirements for the whole supply/demand balance to be tipped on its head.
Just six months ago (especially at the height of the Covid-19 pandemic), we were talking about tens of thousands of hides being sent to landfill, while other hides were being traded at below economic levels to avoid the same landfill fate. Now, we witness hide prices increasing week-on-week, some almost doubling in value since the low points of the summer. Hide traders and suppliers are starting to
play hard ball, releasing only offer lists with the hides they want to sell rather than the hides they know the tanners really want and, as a consequence, raising these hides to profitable levels. Some suppliers are taking breaks from offering hides for weeks at a time, so that they can take advantage of a rising market, who can blame them, for they have plenty of losses to claw back this year.
The U.S. is one market that has not seen a decline in slaughter rates; instead, numbers are running high as beef suppliers struggle to meet the demands of the Chinese consumer. But, because they find themselves are in a somewhat unique position of having plenty of hides in a world short of supply, they have been more than able to take advantage of the situation.
If the Chinese demand for finished leather should continue, and even spread to other parts of the world, then hide prices can only go one way. The downside for tanners in other parts of the world, namely Italy, has been that they have been forced to pay the higher premiums for hides, without having the advantage of the higher finished leather demands.
But despite this current trend, it must be pointed out that global hide/skin prices are still close to historic all time lows and suppliers would be wise not to get too greedy in a very fragile global market as demand could easily disappear as soon as it came.
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