‘After a weak period for orders in the middle of 2003, the situation is easing in 2004’, says Angelika Geiger. ‘Our turnover was lower in 2003 because of the double-digit devaluation of the US dollar against the euro.
‘The SARS epidemic in Asia, the Iraq war, BSE in Canada and the general downturn in the global economy, especially in the US and western Europe, all contributed to a difficult 2003. Environmental legislation and costs are also driving business to eastern Europe, South America and Asia.
‘In terms of environmental legislation, we are concerned about the impact of the REACh (Registration and Authorisation of Chemicals) proposals and also the ban on the use of products containing nonylphenol. As a result of this, BASF have launched their new groundbreaking Eusapon OD.
‘Our biggest customer is currently China. This has changed over the past ten years as our sales balance has shifted from Europe to Asia. We are also noticing an ongoing shift of finished leather from the USA and western Europe to South America and Asia, especially China and Brazil. Asia Pacific is now the key manufacturing region in the world for footwear and there is also a strong increase in the production of automotive leather in China. BASF have also managed to increase our production capacity in China in the past twelve months.
‘Our production capacity was strong in 2003 and we expect the situation to remain stable or improve slightly over the next twelve months. The one thing we need is a more stable balance between the euro and the US dollar.
‘Our aims for the next year include optimising the ecological standards of our entire product range; extending our customer services by further developing our service centres; strengthening our integrated global production network; and offering more integrated solutions to the leather industry.
‘The German leather chemical industry still manages to maintain its leading position on a global scale because of long traditions and know-how of the entire leather manufacturing process.’
Bayer
‘From a consolidated, global point of view, we are very pleased with our performance over the past twelve months, even if we have had to face various problems’, explains Bianca Verstegen. ‘There were a few inter-regional shifts in business as well as some relocation of business on a continental scale, but we were able to compensate for these due to our global sales and our distribution network.
‘In terms of volume, our sales of leather chemicals increased in 2003 compared with the year before. However, as the majority of our sales are invoiced in dollars, we were not able to improve our sales in terms of value because of the unfavourable exchange rate. Our business, and also our customers’ sales, are very much dependent on the strength of the dollar.
‘The slump in consumer demand continues. The expected recovery at the end of the year did not take place and demand is still at a very low level. In Asia in particular, business was badly affected by the SARS virus and, of course, the war in Iraq had a major global impact.
‘Our investments over the past months include:
* modernising the technical competence centre at our headquarters in Leverkusen
* expanding our production plant and doubling the size of our technical competence centre in Wuxi, China
* modernisation of the pigment plant in Uerdingen, Germany
* exiting the exclusive distributorship for finishing products and syntans in Brazil and building up our own local sales network with a technical competence centre in southern Brazil
* strengthening our partnership with Rohm and Haas in the field of acrylic dispersions for the leather industry.’
Discussing concerns about current environmental legislation, Verstegen added: ‘Bayer have been closely following the discussion about the new European chemical legislation (REACh).
Since the first internet consultation document in May 2003, some progress has been made to make the system more workable.
But still its eventual implementation will burden the chemical industry and its customers with additional costs and a huge amount of work.
‘On a smaller scale, the up-coming re-labelling of NMP will create an additional push on the ongoing efforts to eliminate this solvent from finishing dispersions. On the dyestuff frontier, more aromatic amines have been found to be carcinogenic.
In particular, the inclusion of aminoazobenzene in the list leads to some confusion, since it is not yet clear how to run the analysis without getting false positives from widely used nitroanilin.
‘Most of our production facilities are running at a good utilisation rate. In China, we are currently investing in expanding our production capacity. In the next twelve months, we intend to continue with our current business strategy and concentrate on consolidating our position in Brazil and China, focusing on key accounts and improving our innovation rate in the fields of application technology and product development.
‘Italy is still our biggest customer, even though the leather market there has been stagnant for some years now. Sales to China have risen sharply over the past few years and it looks as if China will soon be our number one customer. More and more customers are adopting a global approach and trying to minimise their production and transportation costs in order to improve their profits.
‘However, the shift is also connected to the articles produced. In the shoe upper and furniture leather sectors, for example, we are seeing a shift away from Italy towards Brazil and China. The automotive market is growing constantly, but is mostly supplied from Europe, the USA and the Far East.
‘We believe that Germany is still the world leader in leather chemicals because German products still stand for high quality standards and technical expertise. German companies generally offer a complete range of products with a mix of competitive commodity products and high-performance specialities, in some cases extending to backwards integration. And they do not just sell the products, but also have the technical know-how and a high expert level with respect to their products. This represents added value for the customer. Many companies in Germany think and act globally – ie the supply chain operates smoothly worldwide.
‘In general, we are convinced that the German leather chemical industry, unlike other industries, such as the textile sector, will retain its leading position.’
Boehme
‘The overall leather business over the past twelve months was not really good, but also not too bad’ explains Sandra Botzenhard. ‘After a very successful 2002, we started 2003 with high expectations, which could not be achieved due to an increasing worldwide economic slump. This has continued also during the first two months of 2004 but, since March, we have seen an increase in business, especially in the Far East and South America.
‘We sold the same quantity in 2003 compared with 2002, but with a lower total revenue and lower margins. 2003 was certainly a difficult year and there is more than one reason for it.
‘First of all, the worldwide economic situation was very slow, without any periods of growth. In comparison with the past several years, this was not only a regional stagnation or economic slump, it was really a worldwide one.
‘People have been afraid they will be jobless the next day and so they did not buy. Shops could not sell their goods and so they gave discounts. Consumers then stopped buying because it could be cheaper tomorrow, and a downwards spiral started.
‘The second reason was the weak US dollar against the euro. The leather business is nearly as worldwide as the US dollar and, as a company, Boehme are strongly bound to the euro. Terrorism and the still-continuing Iraq war was a third reason which stopped all possibilities for an overall increase. Last but not least, the SARS virus strongly affected business with China – one of the key markets for leather chemicals. The APLF fair in Hong Kong was also cancelled.
‘However, we have had a good level of orders since March and we are working at a high capacity, although not at full capacity. At the moment, the situation differs tremendously from company to company in Germany. Some are working really well, maybe not at full capacity but on a high capacity level. Some are working very slowly.
‘Over the next twelve months, we anticipate a slow recovery in the German automotive leather industry, but also we think that the upholstery and shoe upper industries will still have some difficulties.
‘From Boehme’s point of view, we will continue to serve the German leather industry over the next twelve months but we expect to see more growth in the Far East and South America.
‘Germany has a strong, competitive leather industry and we are among the most powerful competitors worldwide. We have a long experience and know-how, with many German leather chemical companies over 100 years’ old, companies that have grown from a handcraft factory to a high-performance company.
‘China is now our biggest customer and our sales to this region are likely to increase over the next few years. In the past ten years, our number one selling country has changed several times because Boehme are strongly export-oriented and we have several countries that compete for the number one position.
‘We are also selling more to South America and Russia, but Europe is stagnating, as is Türkiye. We have also opened a new plant in China over the past twelve months – Boehme (Hangzhou) Chemical Auxiliary Co Ltd.
‘We are concerned about the EU-environmental legislation draft (REACh). This will have a tremendous impact, not only on the European chemical industry but also on our customers. If this draft becomes law, it will cost the European industry a whole lot of money and it will discriminate against the European industry compared with the worldwide competition, without protecting the European consumers.’
Carpetex
‘Over the past twelve months, business started well for us’, says Martin Keppner. ‘In the middle of 2003, business reduced but, during the past three months, sales have returned to their former levels. Business is more difficult now; customers are spending less on shoes, furniture and garments and the euro has been strong. But our turnover was higher in 2003 than the previous year and we believe our products and position are right to deal with the current market situation.
‘Carpetex are currently working at full capacity. If the Italian market and the euro stabilise, then we should have a successful year. We’re hoping to increase our profits by around 5% in the next twelve months but we have concerns about the new REACh proposal and also the current political and financial situation in Germany. Our production and development are permanently focused on environmental concerns, but we are relatively nervous about the new REACh system from Brussels.
‘The German leather chemical industry has a long history and, as a result, offers perfect products and good service. Our chemists and technicians have an excellent education and the industry on the whole is well positioned.
‘Italy was never a strong market for us but we can also see a significant movement from European countries to Asian countries. Türkiye, Spain and China are our main customers.’
Clariant
‘Our turnover for leather chemicals in 2003 was lower in Swiss francs than in 2002, but higher in local currencies’, says Kirsten Kunert. ‘We are currently working at full capacity and we believe that the German leather industry will stay at roughly the same level over the next twelve months.
‘Germany is still the world leader for supplying leather chemicals. German companies have managed to retain their leading position due to the quality we produce, our innovative products and our technical know-how.
‘Italy is still our biggest customer and this has not changed for many years. But we are noticing more of a shift in our sales towards Asia, particularly China. Our European sales are currently stable. Over the past twelve months, we have opened a new technical centre in Guangzhou, we are now producing wet-end chemicals in Tianjin, south of Beijing, and we have opened a new laboratory in Castelfranco di Sotto in Italy.
DLH Ledertechnik
Based in Vienna, Austria, DLH Ledertechnik specialise in leather finishing products, including polymers, auxiliaries, lacquers, colourants and other special products. ‘Our business has significantly moved towards China’, says Wolfgang Szabo.
‘In 2002, around 2% of our sales were in China; by 2003, that figure was 35%. Our sales ratio has also changed significantly over the past decade. Around 80% of our sales ten years ago were to eastern Europe; now this figure is just 12%, with the balance transferring to Far Eastern countries. But over the past twelve months, we have seen a 15% drop in sales in China because of the SARS virus and business has also been lower in Europe. In fact, the SARS virus and the problems with the US dollar/euro exchange rate have caused a difficult year. Our business plan for 2004 is to focus on China, reduce the risks from currency fluctuations and increase our turnover by 10%. The biggest problem will be with the new EU chemical law.’
TFL
‘Our value and volume sales in Germany have decreased slightly but our global business is stable’, explains Victor Callegher. ‘Our sales in Germany have been affected by the high euro value against the dollar. The pressure from international and local competition has increased significantly over the past few years, not only in the past twelve months. Mergers, acquisitions and divestments have become part of daily business.
‘Over the next twelve months, we think that business will remain roughly the same as last year but TFL are aiming to gain more of a market share by providing our customers with superior systems and service. We think the German industry will continue to pursue a policy of remaining customer and marketing-oriented by supporting the tanneries with a customised mixture of systems and services.
‘We are currently working at full capacity. German chemical suppliers have a leading global position thanks to the traditional companies such as TFL. We are also active in all the important regions of the worldwide leather industry. The Far East, especially China, is becoming more and more important for TFL. Our current customer structure is Americas (20%); Asia and Pacific (30% and rising); and Europe and the rest of the world (50% and decreasing).
‘In 2003, we were pleased with the progress we made that will further enhance our possibilities of better serving our customers. With the purchase of Quinn, we acquired a leading chemical manufacturer in India and we also opened a new doubleface service centre near Istanbul, Türkiye.
‘TFL inaugurated a service centre in Barcelona, Spain, and we opened additional, state-of-the-art customer service centres in Castelfranco di Sotto and Solofra, Italy.
We finalised our production and warehouse expansion plans in Buscate, Italy, and we were pleased that the transfer of ownership from Permira to Odewald funds went very smoothly.
‘In terms of environmental concerns, there have been numerous undisputed claims recently focused on the unwanted chemical uptake by the human body. Leather offers its wearers enormous advantages but, today, it is rarely perceived as such.
‘Governments, including Germany and the legislators of the EU, protect customers by legislation and directives, although in the past there has been little evidence of harm caused by leather.
‘In order to protect the high reputation of leathergoods, TFL have decided to introduce ‘White Line’ (see page 38). This is a leather based on scientific investigation and research which offers the consumer major assurances in health terms. There are also tannery guidelines for the production with TÜV certification for this customised leather.’
BASF monitor
BASF have been asking visitors to their website to register their opinions on the current state of the German leather industry.
The following is a recent result from the website and shows that most visitors believe that an upturn in business is happening or is about to happen.
To add your opinions, visit [http://www.basf.com/leather] Results average over the past 30 days*
Business climate this month
Good 28%
Average 65%
Poor 5%
Comparison with last month
Better 61%
Same 30%
Worse 7%
Expectation for the next three months
Improving 67%
Steady 28%
Worsening 3%
* taken from website on 24/05/04