Full of hope for the future5 March 2002
The 11th International Leather Days exhibition was a resounding success, despite a last minute change of plans due to a collapsed roof under the weight of a heavy snow fall the week before. Visitors poured into the exhibition on all three days, but particularly during the last day when queues formed in the corridor linking the two main exhibition halls. The fair attracted a total 354 companies from 30 countries exhibiting in an area of 12,000 sq m. This compares with 317 companies of which 137 were from 27 overseas countries who participated last year. And in general, the mood was very positive for the future; one exhibitor commented that he thought the Turkish market would become the next China in five years! None of the tanneries are working at full capacity, so there is certainly plenty of room for growth. Some even believe that the gap in the market between Türkiye and Italy is getting smaller year by year. Quality is the key to the future of the Turkish industry, yet image is also something that needs to improve. One exhibitor was relating the story of an attractive and stylish Turkish woman at the exhibition, but onlookers commented that she must be Italian because a Turkish woman would never dress that way! The fair labels itself as the Europe-Asia Leather Fair, reaffirming the importance of the location of Istanbul in the international leather arena. Some think that the future of the leather industry relies on Türkiye because it is at the crossroads between east and west. Industry statistics clearly show that the Turkish leather industry is growing. Leather exports from Türkiye in November 2001 were up 35.3% year-on-year to reach US$68.9 million. The overall export sales figures for the first eleven months of 2001 were US$608.5 million, up 20.6% compared to the same period of the previous year (see Table 1). However, industry sources believe that with the export of leather through the 'suitcase trade', export figures should be 200% higher, with total exports in the region of US$2 billion. In the period January-November 2001, leather and leather products claimed a 2.1% share of Türkiye's total exports, with leather products claiming the largest portion at 64%. These figures are expected to increase in 2002. In an interview with Leather International, Mohammad Musaddiq, director of Siddiq Leather Works Ltd in Lahore, Pakistan, said that arrangements at the exhibition have improved and that business was better than in the past two years. He stressed the need for more joint ventures between Pakistan and Türkiye and believes that the Turkish leather garment industry is 'par excellence'. 'When the Russian market collapsed, Turkish leather faced a big crisis, but now the Turkish manufacturers are promoting their products both in Europe and America, but the tragedy of September 11 has also affected the industry', he said. He added that the finished leather market in Türkiye is developing at a great speed and there is still a strong demand for nappa leather. Mahmut Yesil from Yesiller said that Deri Günleri is the international fair in Türkiye. He believes that the country needs a good international fair given that the leather industry is one of the fastest growing export markets in Türkiye. The Turkish market has certainly had a tough time over the past decade. Yesil spoke of the period between 1992-1998 when there were big improvements in the industry but the market was out of control. Then in 1998, many tanneries closed, and the following three years were hard for everybody. 'But last year was the first year that many of the remaining tanneries were satisfied with business, although we are still working under capacity', Yesil said. He believes that more small tanneries are likely to close over the next five years and thinks that more tanneries need to sell finished leather. 'We export finished leather', he said, 'but we want to do more.' Yesiller specialise in doubleface and import 90% of their raw materials from Spain, the UK, Australia and France. The company are currently moving more towards lighter skins to compete with Spain. In terms of machinery and chemicals, Yesiller import 80% from abroad. Yesil believes that quality is better in Spain and Italy, but says that Turkish companies are gradually improving. Yesiller's main customers are Germany then Russia, but they are also trying to sell to the Far East. He feels that big changes will soon take place in China and new regulations will force the country to change the way they do business. The company has exhibited in China for the past three years with varying degrees of success, but he is optimistic for the 2002 Shanghai exhibition. China's future influence Chemicals manufacturers Verbo specialise in pigments and claim to take a 90% share of the Turkish pigments market. The company's main customers are primarily in Türkiye and the Middle East and they also produce leather finishing chemicals. But sales manager Turgay Sahin said that Russia, Pakistan, India and China all have the potential for growth in the future, simply because of the high population numbers in these countries. 'In the next ten years, the doubleface market in Türkiye will grow and then, after ten years, if China develops, they could become a real competitor', said Ruken Mizrakli of Gündüz. But she is anxious about the instability of raw material prices. '2001 was a good year for us but we are concerned about prices in 2002 and we want to proceed carefully', she said. Gündüz import all of their raw materials from Spain and sell to garment manufacturers in Türkiye, Korea, the Far East, Russia and the US. But Mizrakli is optimistic for the future and the company are also opening a second tannery in Çorlu in 2002. Hadi Oke from Erlüks Deri agrees on the future importance of China. Most of the company's customers are in Russia because it is nearer and the demand is there, but he believes that China's entry into the WTO will make trade economically easier. 'China is a flower', he said. 'But first we need to trust China and its new system before we can build a relationship.' Improving quality Erlüks Deri only produce calf skin at their tannery in Çorlu. The company import the majority of their machinery from Italy and chemicals from Germany since many of the chemicals they need are not produced in Türkiye. The company import their raw materials mainly from the US and Europe. 'Italy is the leader', said Hadi Oke, 'so to produce a leather of equal quality, you need to import raw materials. But Türkiye has a great future', he added. 'And because of this, Turkish companies are working hard to improve.' Osmanogullari produce mainly nappa and lambskin, but also want to move into doubleface production. 'We've bought the new machines and will begin production in 2002', said Refik Yilmaz. He added that the quality of Turkish leather is developing and improving day by day. 'Five years ago, the Turkish market was producing a lot of leather but quality was low. Now the situation has reversed', he added. 'Doubleface quality in Türkiye is better than other countries, and this is why Russia is so interested', agrees Önder Agartioglu, president of the Agartioglu group. Agartioglu Deri have been in business for 58 years, specialising in doubleface, nappa, cow and goatskin. When asked how he coped with the 1998 crisis, Agartioglu replied: 'We waited, we were patient and we survived.' He also believes that both Russia and Türkiye's importance in the world leather industry will grow considerably in the future. New horizons Although the crisis of 1998 forced many companies to look for alternate customers in alternate countries, many in the industry still acknowledge the importance of the Russian market. However, some of the Turkish companies are trying hard to move away from Russia to avoid the impact of any crisis that may hit the country in the future. 'We do sell to Russia, but also to America and Italy', said Mehmet Kemal Ester, general manager of Özderi Dericilik. 'But we want to improve our customer base in Europe', he added. Ester also said that business had been good for them in 2001, but he is expecting things to stay at about the same level in the next five years. Family tanners Harmanli's main customers are in Greece, Denmark, Estonia, China and Lithuania and they are currently forging new relationships with customers in Russia and Belarus were geography is an advantage. Hikmet Çivici, marketing executive, believes that the 1998 crisis was a actually a good thing for the company as it forced them to look for new customers elsewhere. The company plan to enter new markets such as Scandinavia and the US and will exhibit at Mifur in Milan in March, at Le Show in Russia in July and also plan to exhibit in the Ukraine. The company specialise in doubleface and leather garments for women. Their modus operandi is to import the raw materials and then add something extra. Çivici told Leather International: 'Product quality is key for us. Our customers know that we provide something different, especially our doubleface and nappa products.' The company are also setting up an information network system to develop on-line order processing via the internet. Turkish chemical company Sarchem export 65% of their products to China, India and Pakistan; in total they export to twelve countries around the world as well as selling domestically to Türkiye. 'Russia still is a good customer for us, it always was important and always will be', said Mehmet Sarialemdaroglu. The only way for Sarchem to cope with the 1998 crisis was to focus on their exports. The company were already seeking new customers abroad before 1998, and they quickened their search because of the crisis. The company are now focusing on the African region. The International Leather Days exhibition was very successful for the company, Sarialemdaroglu explains. 'As the exhibition is held in our country, it is very important for us to be there. We also hope that there will be more cow hide producers at the exhibition in the future', he said. However, not everybody agrees that the 1998 crisis was a good thing. S Sancaktar from Yasar, the Turkish agents for Italian finishing chemicals company Fenice, believes that the Turkish leather industry was in a better state five years ago. 'Five years ago, our products were sold to Russia, but Russia will become important again in the future', he said. He described how the image of Turkish and Russian leather was not so good in the past, but now it is improving day by day. 'Slowly but surely, Türkiye will become more important', he added. Machinery manufacturers Deri-Maksan started out in 1988 in a small workshop. Now the company employ 175 people but the company, like so many others, was badly affected by the 1998 crisis. Up until 1998, Deri-Maksan were producing around 30-35 units per month, then after 1998, only four units per month. In 2001, this figure had climbed back to 10-12 units per month. Okan Atesler believes that the company will never get back to pre-1998 levels simply because there are less tanneries to supply to today. Conclusion The Turkish leather sector has both the capacity to produce high quality and the experience and potential to create and sell brands. However, the increasing dependence on imports of garment leather and the lack of cooperation among leatherwear manufacturers keeps the sector from advancing. Türkiye is mostly dependent on the import of both raw hides and processed leather. Even though policies are being implemented to increase livestock in Türkiye, it will take a long time to reach the desired levels. For this reason, Türkiye's dependence on imported raw hides will endure for many years. A significant number of Turkish tanners are now inactive due to an inadequacy in raw hide supplies. In order to solve the problem, many believe that barriers for semi-finished leather imports must be removed. The VAT rate applied to wet-blue hides is currently 18%; if this could be reduced to 1% as is the case of raw hides, then the Turkish leather industry and its exports will strengthen as restrictions to raw hide exports do not apply to wet-blue hides in the international marketplace.