New lambskin tannery for Patagonia

Compañía de Tierras Sud Argentino (CTSA), the oldest and largest wool production business in Argentina, are planning to open their first sheepskin tannery in 2007. The facility will be located in Trelew, in the Chubut province of Patagonia and create an estimated 140 jobs. Speaking at the company's Buenos Aires headquarters, Gabriel Levy, CTSA's head of accounts, told Leather International: 'The US$11 million plant rolls out next January and target production levels for 2009 are for 600,000 lambskins a year.' For the first year the tannery, to be called Fabril Patagónica, will produce 100,000 lambskins as the company tests a variety of products with clients, based mainly in Europe. A smaller volume will be destined for Russia and Canada. In order of volume, the main type of products to be tested will include: tanned doubleface shearlings, lining for clothes and shoes, home furnishings and automotive leathers. 'We are aiming to provide as much added value as possible', said Levy. The company's investment in the facility, located in Trelew's Industrial Park, has totalled US$11million. The new tannery was converted from a textile factory which CTSA acquired in August 2005 at a cost of around US$1 million. US$4million was spent on refurbishing the existing 8,000m2 plant and expanding the factory by an additional 5,500m2. A further $4 million was earmarked to buy machinery from the Italian tannery So.Co.Pel, based in Trieste, after its closure. The purchase of the machinery was made in association with CTSA's Italian partner tannery Pellicerie Francetich, based in Montegaldela, Vicenza. The machinery includes plant from Italy, France, Germany, Belgium and Spain such as Pajusco beamhouse drums, a CapdeVila wool scouring machine, a So.Co.Pel fleshing machine, and a Bergi setting out machine. CTSA also invested $1million on a requisite 1,200m2 treatment plant with a double filtering system to eliminate hazardous wastes. The industrial park also has its own treatment plant. A final $1 million was invested in operational services (including water) for the plant. Company history CTSA operated as a British company from 1889, the boom years of the sheep industry worldwide, until 1975 when they were sold to a group of Argentine investors. Benetton acquired the company in 1991. Traditionally a sheep rearing business, in 2004 CTSA decided to capitalise on their status as Patagonia's biggest landowner and their sheep count of 260,000 (Corriedale and Australian merino breeds). The original idea was to launch a tannery alongside a complementary operation - a slaughterhouse aimed at lamb exports. The slaughterhouse project was eventually shelved, but may be revived at a later date. Levy explained that CTSA's decision to open a tannery was inspired by the marked reversal of fortunes in Patagonia's sheep rearing business over the past five years. The main factor contributing to the revival in sheep rearing, which had suffered a seemingly interminable decline since the 1980s, is the significant devaluation of the local currency (the peso) following the country's economic collapse at the end of 2001. Much of the export sector, which had suffered under the high exchange rate of the 1990s, saw an increase in business. 'As Patagonia's sheep stock started growing, so sheep counts in Australia and New Zealand, as well as in Europe, were dwindling', said Levy. The recent economic crisis also led to the collapse of many local factories, enabling bigger companies such as CTSA, especially those with foreign backers, to revive ailing companies at a relatively low cost. CTSA chose the site at Trelew after considering two other options. As an oil producing centre, Comodoro Rivadavia benefits from an industrial infrastructure but higher labour costs while Rio Gallegos, one of the most southerly towns in Argentina, is closer to many of the sheep estancias (farms) but has little workforce. The factory's leather exports will be transported by road 60km to the nearby port town of Puerto Madryn from which cargo ships will carry them northwards to the international ports of Buenos Aires and Montevideo, Uruguay. The company own six large production centres, three of which are located in Patagonia: Estancia Cóndor, in Rio Gallegos, province of Santa Cruz; Estancia Coronel, in San Julián, also located in Santa Cruz; Estancias de la Cordillera: incorporating Leleque and El Maitén - both in Chubut. Estancia Pilcañeu is located just north of Patagonia in the province of Rio Negro and the Estancia Santa Marta is located in Balcarce, province of Buenos Aires. The bulk of production at the ranches is sheep with 260,000 head producing between 1.15 million and 1.3 million kg of wool a year, all of which is exported to Europe. The ranches also have some cattle, producing 16,000 bovine head a year, alongside some cereal production. The company have recently diversified into the forestry business with plantations of 5,700 hectares so far. CTSA have generated $11 million in profits in the last twelve years, all of which has been reinvested in the estancias. An estimated $1 million extra is invested annually to improve facilities at the production centres. Strategy The foray into the tannery business forms part of CTSA's efforts to strengthen their wool interests in Argentina and to consolidate their prominent role as a raw material service provider. The company own more than 900,000 hectares of land in Patagonia, Argentina's main sheep rearing area. The decision was taken despite ever growing competition from Chinese tanneries and the existence of well-established rivals in the region, mainly Uruguay and Brazil. In the last decade, CTSA, who were acquired in 1991 by Edizione Real Estate, owned by Italian fashion giant Benetton, have invested up to US$80 million in different industrial initiatives. The company recently launched, in the nearby port town of Rawson, a wool washing, carding and combing operation aimed exclusively at exports to Italy. Called Cosu-Lan, the wool laundry was set up with local wool giant Fuhrman, owned by the Schneider group.