Extracts from the SauerReport11 March 2010
On December 3, 2009, the Rwandan government officially revoked their September 2005 export ban on raw hides and skins. For the moment there is no export duty levied but the country intends to organise a cooperative system for the collection of raw hides and skins. In Brazil, hide prices stopped increasing in December and many factories were closed for their summer holidays, only returning to work on January 4 this year.
And the Chinese will not receive any goods between February 1-24 so tanners prefer to minimise their stocks and collect payments as cash flow is tight before the Chinese New Year holiday. When business resumes, the volume of new orders will be determined by the spending over Christmas, as well as Western and Chinese new years.
Overall the situation is optimistic. 2010 will be a better year after last year’s hardships, especially for those organisations that are well managed, financially sound and with pollution controls in place.
A few years ago the local government lured some tanners to
relocate to Bingzhou, in Shangdong Province. This was after the EPA (Environment Protection Agency) had started to crack down on the Wenzhou area. It is said the local government promised to build a central effluent treatment facility but those who have visited comment that the promise was false.
The EPA then started shutting down many of the small tanners in this new centre (mostly split tanners who started from lime split) while they told the big tanners to build the effluent treatment plant themselves! The excuse of the local authorities was that the centre was not sanctioned by the Central Government.
Now the tightening EPA activities are extended to all over Guangdong Province and further. It now looks like a nationwide movement. The Chinese Government really has made up its mind to clean up. Good news for the next generation. And especially good for shutting down some of the over capacities and limit or cut out the unfair effluent treatment cost competition which exists between tanners who comply with the rules and absorb the costs which come with it and those who don’t.
According to the Turkish leather foundation, the year 2009 was not good at all for the industry. Turkey, which exports 95% of its leather and leathergoods production, saw exports drop 35% during the first ten months of 2009 while footwear exports dropped 25% during the same period. Total exports were valued at US$1.6 billion in 2008 but for the past year the figure is expected to remain $0.5 billion below that.
All know that Turkish success and later its problems have always depended on its export markets which were basically limited to Russia, Ukraine and some EU countries. To get away from this dependency and put the Turkish eggs in more baskets the industry has worked hard to increase exports to the Far East.
Exports to Korea, Singapore, Taiwan, Indonesia and Malaysia, have all increased by more than 50%, with even more to Bangladesh (more than 1,000% has been reported). The rise in percentages is fantastic but the export volume in absolute figures must be less impressive. Exports to Spain have more than doubled.
Official statistics published by the Italian shoemakers association ANCI show that during the first seven months of past year (2009) exports of shoes with leather uppers dropped by about 17% in volume as well as value compared to the previous year. The average price of a pair of shoes increased by 1.5%. Main export markets for Italian shoes are France, Germany and the UK.
The fight between EU member states for or against an extension of the anti-dumping duties on leather footwear from China and Vietnam has hardened and turned totally political. In a first vote 15 states were against extension which was a good enough majority in the 27 member state union. Now a few countries have changed their minds. Germany, Austria and Malta have expressed they would no longer oppose an extension. According to EU rules this would mean their non voting would move the advantage to those who want the extension continued. The final ministerial vote is scheduled for December 22.
The biggest veal producers in the world, the Van Drie Group, Netherlands, already owners of calfskin trading subsidiary Oukro, have taken over the Alporo Group which handles 265,000 calf per year.
This integration in the veal business my lead to changes in the supply of calfskins to
independent traders in this product. It could even cause supply problems for some of them as we have already seen happening with the integration process in Germany and lately in Brazil. Some of the newly formed bigger meat producing groups in the world intend to tan and market their hides and skins themselves, leaving traders with less resources.
Contrary to problems with PETA, as many in the meat business have experienced, the Van Drie Group have recently been awarded with a Better Life Star, an animal protection award, issued by the Dutch Animal Protection Group for the company’s fair treatment of animals.
According to the Bangladesh Tanners Association raw hides and skins for about half of the country’s total annual leather production of 220 million sq ft was collected during the Eid festival slaughter.
Results for the first quarter of the current fiscal year have not been bright compared to the same period in 2008. Total leather exports dropped by almost 25% to US$45.5 million. Footwear exports were not so bad and show only a 2.95% decline for the period. Value was US$56 million.
Better times returned when China and Hong Kong started buying huge quantities of leather towards the end of 2009. This prompted the tanners, who expect this positive development to continue, to buy as many hides and skins as they possible could during this Eid festival.
Also internal consumption of leather more than doubled from 15 to 35%!
India’s exports declined by 6.6% in October to US$13.2 billion while imports dropped 15% to $21.9 billion. The trade gap narrowed to $8.8 billion from $11.7 a year ago. Exports (for all products) have been declining every month for thirteen consecutive months.
Exports started falling in October 2008, at the start of the global financial crisis, to reach a 39% decline in May. But since then the pace of the decline has slowed down and goods like leather, gems, jewellery and garments started to show positive figures again. The continuous slow down in the decline is a positive sign and is hoped to continue, helped by more positive vibes from the USA, Europe and the new year sales.