Future use and destination of raw materials14 November 2001
Arnaldo José Frizzo, vice-president for marketing and commercial promotion of CICB (Centre for the Brazilian Tanning Industry) and director-superintendent of the Braspelco Group, Uberlândia/MG, has given us the following information: 'In 1980, Brazil's bovine cattle slaughter numbers were equivalent to 7% of global culling. In 1995, Brazil's share within the world's total had gone up to 13.25%. The country is expected to reach 22% of the total global beef and hide production by 2010. 'In Brazil, beef is very cheap. It is also natural and obtained from cattle reared in healthy pastures. No other country has so many favourable conditions for cattle breeding as Brazil. We are definitely bound to become world leaders in beef and hide production. Nothing will stop this positive and historical reality. 'In the seventies and eighties, Brazil exported between 10-15% of the available leather. From the nineties onwards, the country saw a gradual increase in exports. From 2-3 million bovine hides per year, Brazil went on to export 15-16 million units. 'We must remember that between the seventies and the end of the nineties, the leather sector in the rest of the world grew very little, therefore the importance of Brazil as a leather supplier grew proportionally greater. 'The growth was a direct consequence of massive exports of wet-blue leather. At the moment, the trend is for Brazilian exports of crust and finished leather to grow further, together with shoe, leathergoods, leather upholstered furniture and other manufactured products. 'In the next few years, exports of wet-blue will be greatly reduced, while international sales of manufactured goods will grow. This is a natural, almost inevitable step. 'Globalisation has narrowed all sorts of gaps. Capital becomes more accessible to all as do technology and markets. Taking raw (wet salted) or wet-blue hides from a producing country, transferring them to a third country for processing to then be exported to the countries where the consumers of the final goods are located, is a practice which will gradually fade away. 'Any trading mechanisms not bringing about significant added value levels to primary materials will not be acceptable. Therefore, more and more frequently, raw materials will be transformed into higher added value goods in their countries of origin. 'Brazil will then have an even more important role in the world of leather and leather manufactured goods. The country's economy and all other structural conditions are now mature enough for the changes to take place'. Regarding Braspelco, Frizzo told Leather International that 'the group has simultaneously been a pioneer in raw hide improvement programmes for the Brazilian market and in the development of markets for Brazilian leather around the world as well as creating innovative products. Next year, Braspelco will inaugurate a new, very modern and versatile tannery able to produce 1.5 million finished hides per year plus manufactured goods.' Augusto Sampaio Coelho, president of CICB and director of Curtume Moderno S/A, Petrolina/PE, told Leather International that 'cattle breeding is still expanding in Brazil. There are large areas in the north of the country where it is just starting to develop. This means that Brazilian tanners need not worry about hide supply in the future as production should grow further. Today, the exploitation of the herd is around 19% and growing. Hide availability is bound to rise as hides are a sub-product of beef and beef consumption should increase in the country in the coming years deriving from the people's improved financial situation. 'Regarding demand, domestic shoe consumption will inevitably grow as social indicators improve. 'This year, Brazil should increase leather exports by 14% over last year's figures to approximately US$850 million. From January-June, leather exports have reached the US$441 million mark with Italy as the main buyer accounting for 20% of exports. 'Brazil is starting to appear as an important furniture and motor upholstery leather supplier, mainly regarding more affordable articles. This is very stimulating at a time when this market niche is growing quickly. The Brazilian tanning industry is aware of the country's large supply of raw materials and, therefore, is getting technologically ready to acquire a significant share of that market. 'The next two years are crucial for the strengthening of the Brazilian tanning sector as negotiations have started towards forming ALCA (the Free Trade Area of the Americas) as well as discussing bilateral European Union-MERCOSUR agreements. ALCA will hopefully open great business possibilities as well as an enormous market for Brazilian products, especially for the country's shoe industry. Negotiations with the European Union will insist on lifting the 6.5% duty on Brazilian crust and finished leather imports. 'The tanning industry is one of the oldest in the world and will certainly remain strong for many years to come. At present, due to the dynamics of a globalised economy, we are witnessing the migration of industrial plants from one country to another in the constant search for the optimisation of financial return. Those countries which have some sort of important competitive advantage such as technology, large availability of raw materials, a strong consumer market etc, are being aided by new investment. 'Research and development constantly improves the unique characteristics of leather. Leather is a fashionable, comfortable, healthy, resistant and natural material. It covers a wide range of applications and the public appreciates everything made of it. The collaboration between the various sectors involved in the leather industry is the formula of success for Brazil to expand its already large market even further.' Regarding Curtume Moderno, Coelho explained that at the beginning, right after the inauguration in 1976, his company processed just goat and hairsheep skins but eight years later they bought a company producing hides which were then processed at the tannery. At the moment, Curtume Moderno employ 280 people and process 1,000 bovine hides and 4,000 skins per day. Around 70% of the production is sold to the domestic market and the other 30% is exported. Cezar Müller, CICB vice-president for raw materials and products and director of A P Müller SA, Portão, is glad that 'the turmoil caused by BSE and FMD during the first half of 2001 has now come to an end. In the first semester of the current year, prices rocketed due to the sanitary crisis affecting a number of countries around the world. 'Global demand was huge because of two main factors: the shortage of raw materials caused by the low offer by BSE and FMD infected countries and the comeback of leather as a fashionable material. At a time when offer was low, demand grew considerably, unbalancing the market. It was then that Brazil became the world's largest leather supplier for the duration of the crisis. People all over the world looked to Brazil for raw materials. 'The fright has now passed but the sector still feels the consequences of the problems occurred in the first semester such as the current tight leather stocks. At the moment, the market tends to stabilise both in terms of stocks and prices which are gradually becoming more typical. Raw material offer is normal at the moment and should remain that way. The Brazilian leather sector will most certainly have a good second semester.' Exports of finished leather The Brazilian leather sector is placing a lot of emphasis on the need to produce higher added-value articles for export. Tanners, trade associations, authorities etc are working hard towards giving Brazilian leather and leathergoods the necessary levels of quality demanded by the international market, as well as a national identity reflecting all the advantages of buying Brazilian products. With that concept in mind, the various sectors within the industry have created Quality Seals to identify their products both in the domestic market and for export. All the seals are backed by a strict evaluation process based on national and international technical standards guaranteeing product and service quality. Last year, CICB launched the Institute of the Environment for the Leather Sector which has two main missions: a) to show the Brazilian society the concern of the leather sector with the environment and how it continuously works towards eliminating any possible risks to nature and, b) encouraging tanners to treat their effluents because, apart from being their obligation as entrepreneurs and members of society, today it is definitely a competitive advantage to do so if they wish to export their leather to countries such as the US and Europe.