Tougher than leather – All China Leather Exhibition

The first thing that hits you when you get into the main entrance of The Shanghai New International Expo Centre (SNIEC) is the frenetic pace. There seemed to be no holding back on opening day of the 2016 All China Leather Exhibition (ACLE) as people flooded into the hangar-sized halls. The scale at this show is unlike any other in the calendar, and expectations usually run high, but given the overall circumstances of global leather, and the transitioning situation in China on which much of it largely relies, the end results overall were mixed, but muted.

In an overall climate of a weaker demand for imported leather in the world’s biggest user country, and reduced consumer spending in developed nations hitting even luxury brands, it wasn’t surprising the fair didn’t yield great results for some international exhibitors.

Despite the gathering dark clouds, head-winds or any other analogies for the challenges facing the industry these days, however, there are still plenty of reasons to invest in the future of leather.

Numbers game

ACLE proved its resilience in the teeth of a challenging market situation by attracting an overall increase in exhibitors and visitors compared with last year’s event.

Exhibitor numbers rose from 1,044 to 1,167 (up 11.8%), with an enthusiastic participation of Chinese companies, and total visitor numbers also recorded a slight increase, remaining at around 23,000 with a 3% increase in Chinese buyers from the main manufacturing provinces.

There were 405 fewer overseas visitors than in 2015, but 3.07% more from mainland China’s principal manufacturing provinces, indicating that China’s economic pulse is still formidable, even if it has slowed slightly in recent years.  Another reason for the increase in Chinese visitors could be the steady rise in business confidence of the private sector during H1 of this year, proving that the negative economic backdrop didn’t deter local buyers, whose numbers increased by 8% on the opening day of the event.

The importance of ACLE cannot be understated, as it’s been inherently entwined with the Chinese leather industry, serving as a global barometer since it began in 1998. As it’s positioned upstream in the supply chain, it serves as the nucleus for material creation that ultimately provides for footwear and other goods from the world’s leading brands and fashion houses.

This 19th fair began with its traditional press conference, at which APLF director Michael Duck, whose cold made him sound like his namesake, emphasised the fair’s prominence in the industry and its ability to put on a complete and integrated event that served the needs of China’s dynamic leather industry under one roof (or many, in this case).

CLIA’s outgoing honorary chairman Su Chaoying offered a brief overview of China’s leather industry, including the fact that China’s SMEs produced 2.16 billion pairs of leather shoes in H1 of 2016, a year-on-year rise of 1%.

But first-half results for imports of semi-finished leather in 2016 showed a decline of 10.8% in volume. The decline was even sharper in finished leather, at 20.5%, compared to the same period in 2015.

These two figures are evidence of weak demand from Chinese tanneries and manufacturers as the nation’s leather industry is in a transitional phase that will take up to three years to complete, according to Su.

Thus, with ACLE taking place with the backdrop of weaker demand for imported leather in the world’s biggest user country and poor consumer demand in developed nations hitting even the results of luxury brands, that ACLE 2016 didn’t live up to expectations of some international exhibitors was unsurprising.

Lanxess VP and IULTCS president Dietrich Tegtmeyer also gave a presentation on the aims and activities of Tegewa, a Germany-based association of chemical suppliers in northern Europe, and Leather Naturally!’s Mike Redwood spoke about, among other things, a new messaging strategy to better engage with NGOs to help disseminate accurate, factual information about the leather industry in order to better educate consumers.

Long-term investment

As expected, transition was the underlying theme of the fair, as China is in the midst of its 13th Five-Year Plan for its leather and footwear industries, and overhauling on such a massive scale takes time.

Despite the short-term deficits and lean years ahead, those in leather are urged to be patient, initiate contingency plans, invest strategically, and plan for the overall benefits of the big picture.

This exposes some cultural friction, during the show notwithstanding, but the event also served as a demonstration that, when this industry decides on a goal, it has the capacity and potential to bring its sectors together and work collaboratively towards it.

That still exposes some difficulties and hard decisions, but there is a louder drumbeat that increased cohesion across the industry is more essential than ever.

The significant presence of chemical suppliers and leather manufacturers launching new products and applications, and benefitting from the flow of professional buyers from China and overseas, was therefore encouraging.

Yet the overall perception was a sense of fewer visitors in the international halls, although this was somewhat compensated for by more Chinese buyers in the domestic halls, which had seen a solid increase in local exhibitors (+22.4%) compared to 2015.

Despite slower economic expansion in recent months, the commitment of China’s leather industry to remain a reliable engine of growth has not wavered, according to Su. The major targets set for 2020 outlined in the 13th Five-Year Plan include an annual growth rate of 7% in sales revenue; an annual growth rate for R&D investment of 10%; and an increase in market share of exports to developing countries of 55% – up from the current 49%.

Optimism also prevails in the automotive upholstery leather sector, with a 6% growth in car sales anticipated this year.  ?

Leathermaking in China

After lunch on day one, APLF and Hidenet Publications had its conference on the status of China’s leathermaking industry, made up of an illustrious panel including Prime Asia’s Jon Clark, International Council of Tanners’ (ICT) Richard Pai and Stahl’s Mark Chatwood to help inform the sector of what was happening among China’s tanners.

Mike Redwood of Leather Naturally! gave a synopsis of economic and leather industry change in China, and was followed by Hidenet managing editor Vera Dordick, who gave a snapshot of the global hide supply, including slaughter and cattle populations.

Chen Zhanguang, CLIA deputy secretary general, discussed the future of the tanning industry in China, noting that stricter policies on environmental management, including waste water, solid wastes and odour, will be put into practice. There will be fewer tanneries, though the capacity of finished leather will remain stable, and that the tanning industry will become more orderly in all aspects.

A statistical analysis of China’s hide consumption was presented by Windsor Huang of Hearty Xiamen. Huang gave overviews for imports and origins of hides, as well as a survey of tannery size, numbers, and projected increases and decreases.

Clark discussed why companies like his were staying in China, and the opportunities that China still offered. He stressed that while staying in China was beneficial, it did not preclude pursuing opportunities in other areas of the world.

Pai then talked about mainland tanners and how they can adapt to the increasing need for just-in-time delivery, and the response to rapid changes in footwear fashion and consumer desires.

Lastly, Chatwood discussed future quality expectations for tanning in China. He noted that everyone would need to meet all new legislation and expectations, distinguish leathers from synthetic alternatives, and ensure that quality met the expectations of today and the future, whether the leather was supplied from South America, or was Chinese-made crust.

New World

The third World Leather Congress is scheduled to be held in Shanghai on 29 August 2017, the day before All China Leather Exhibition 2017. The former will be organised by the co-hosts – Taiwanese International Leather Association (TILA) and the China Leather Industry Association (CLIA) – with assistance from the International Council of Tanners, with APLF as founding sponsor.

Following the successes of the World Leather Congresses in 2011 in Rio de Janeiro and 2015 in Milan, its theme will be the ‘leather revolution’, recognising the profound changes that will take place throughout the marketing chain over the next two decades, and focusing on how the industry should respond.

Each congress represents an opportunity to remind people of the importance of the leather industry in international business, the major changes taking place and the enormous steps that the industry has made in demonstrating technical expertise, social and environmental responsibility and sustainability.

It is particularly relevant that this third event is being held in China, because this country, and those that surround it, have constituted the most important and dynamic region in the world for the production of leather and the goods made from it. It is from here that the most significant changes to the industry will be driven.