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Leatherbiz Market Intelligence executive summary: • • • • •
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A recent initiative in China may offer a good example for the global leather sector A leather manufacturer there is no longer content with being an upstream material producer It has begun cooperating directly with a fashion designer They are using a major fashion event to present the collection they have worked on together Market Intelligence argues that this positive attempt to become “more deeply involved in the actual product development process” is allowing the leather manufacturer to be not only a supplier but a true partner to designers and brands It says this is a much better approach than simply waiting for the old demand to return.
MARKET INTELLIGENCE
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evelopments during the last few weeks can probably best be described as the usual summer slowdown, which has now reached almost the complete supply chain. In parts of Europe the summer holidays have already started, while in the remaining regions they are just around the corner, and activities at all levels will therefore be substantially reduced for a period of almost two months. This starts with meat production, continues through the raw hide trade and the leather industry and finally reaches finished product manufacturers, brands and retailers. The kill in Europe remains low and is also likely to decline further during the remainder of the year. EU beef production is expected to fall by 2.6% in 2026, while the number of cattle produced during the second half of the year could be 4.2% below the corresponding level of the previous year. Beef consumption has already been in structural decline for several years and is expected to decrease by another approximately 2% in 2026. The worldwide picture is not completely uniform. Brazil has significantly increased its beef production during recent years and has temporarily overtaken the US as the largest producer, while at the same time the US cattle cycle and first forecasts for Brazil indicate that the availability of cattle for slaughter could become tighter again in important production regions outside Europe during 2026. A lower kill would generally be positive for the raw hide market, but supply alone does not create demand. As long as leather production does not increase, lower slaughter volumes only mean that less raw material has
to be distributed in a market that remains weak. It does not solve the real problem, which is the lack of orders for leather. The sales situation for raw cattle hides therefore remained difficult during the last few weeks. Bids continue to come from China and other parts of Asia, but they remain strongly price-driven and concentrate either on very cheap commodity material or on the special qualities required for specific applications. An increase in Chinese raw hide imports should therefore not be confused with a fundamental improvement in the leather market. At the same time, China has significantly reduced its import duties on wet blue in 2026. This makes imports of semifinished leather more attractive and possibly creates a further incentive to carry out the early production stages in those regions where energy, labour, chemicals, environmental costs, avoidance of duties and the final sales market can be combined more favourably. For European leather producers this makes a fundamental question even more urgent: which production stages can remain competitive under the existing cost conditions in the long term? Labour, energy, financing and regulatory costs are high, while capacities are in many cases not sufficiently used. In such a situation, losses are not necessarily created by the purchase of the raw material, but mainly by the fixed costs of unused plants, long production cycles, high inventories and the need to keep a wide range of qualities and colours available for customers who themselves are planning on an increasingly short-term basis. The obvious economic reaction is to reduce production, specialise more strongly, combine production sites or finally transfer
individual production stages to other regions. This is not a problem limited to the leather industry but can now be seen across large parts of European industry. The European textile and clothing sector already recorded its third consecutive year of falling production, turnover and employment in 2025. Further textile production companies are closing in Europe every week. The automotive industry, which remains of central importance for large parts of the European bovine leather sector, is also experiencing cyclical weakness and is obviously going through a structural transformation. European automotive suppliers announced the loss of a total of 104,000 jobs during 2024 and 2025 alone. At Volkswagen, a considerable reduction in capacities, fewer model variations, extensive job cuts and plant closures are now being discussed. Whether all these measures are implemented remains to be seen, but the scale of the discussion alone shows how serious the situation is. For the leather industry this is of considerable importance. Fewer vehicles produced initially mean fewer seating surfaces required. At the same time, automotive manufacturers are trying to reduce the number of variations, lower purchasing prices and standardise materials to a greater extent. Leather is therefore not only competing against other leathers, but against coated textiles, plastics and new composite materials, which are easier to plan in industrial production, offer a more predictable cutting yield and provide more uniformity. Under strong cost pressure, the question is not which material is fundamentally of higher quality, but which material fulfils the required technical standard at the lowest total cost. A similar situation can be seen in the furniture sector. European furniture production has continued to decline, while demand in 2026 is expected to remain almost stagnant. At the same time, imports of upholstered furniture from countries outside the EU have moved close to their previous record levels. European upholstered furniture manufacturers are therefore facing double pressure from weak demand and lower-priced imports. Here as well, there is a risk that either the complete production or at least the labour-intensive production stages will be transferred to regions where costs are lower. This does not only concern sewing and upholstering, but indirectly also the sourcing of the materials. If the furniture is produced in Asia, North Africa or Eastern Europe, it is less likely that the leather will pass through several additional transportation and