Our latest Leatherbiz Market Intelligence newsletter is available for subscribers to read in the Intelligence section of the website from April 19. It says that, on top of the human suffering that the war in Ukraine has caused, the wider world is feeling the effects of increased food and energy costs. However, the report also makes it clear that lockdowns in China are probably having a more immediate and direct effect on the leather pipeline now.

Shows a ship at the Yangshan deep-water container port, 30 kilometers out to sea from Shanghai.

A strict lockdown because of new cases of covid-19 has been in place in Shanghai for more than three weeks; lockdowns have also begun in other cities, including Tangshan in Hebei province.

Ongoing disruption to production in China and to the shipment of raw materials into the country and of finished products out of its ports could cause substantial problems for the leather sector, the Market Intelligence report says, in the absence of a strong increase in demand from brands and consumers.

It adds that a “dangerous situation” with increased risk is building up, at least in the raw materials markets. The war, inflation, logistics problems and the pandemic situation in China are not a good basis for optimism about the volume of orders that might come from retailers in the second half of this year, it points out.

“As things stand, anything other than caution in ordering behaviour would be a surprise,” it says. “We see an increasing risk that leather manufacturers might run into liquidity problems. Lack of sales combined with skyrocketing costs and the need to pre-finance them are a real threat to many small and medium-sized businesses. It does not seem to us that the market can return to balance in the next few weeks.”