Extracts from the SauerReport

Chinese and Taiwanese tanners report good business but much of their success seems to depend on whether and, if so, how much they have been able to increase leather prices to their customers. Increases are usually applied in various stages to make them easier to absorb. There are those who saw increases accepted without too much of a problem (mainly those who deal with the major shoe brands) while others feel they are now losing orders because of the increase.

The latter wonder if they should not return to their old prices in order not to lose business for the present but also for the new season which starts in September. The present shoe season ends in August.

Others tanners saw no more new orders coming through these last two weeks. This explains why many raw sellers to China report a drop in interest since mid April.

Tanners in China are still puzzled about how to deal with the new import policy. Custom books are expiring on different dates depending on which province and which tannery. The overall picture will only be clear in 2007. Meanwhile everyone tries to find a solution.

Taiwanese tanners are trying to increase their production in Taiwan to the limit of what their effluent plants and labour force can handle. They are also trying to utilise any excess custom book quotas available in China. Those who have tanneries in China are looking for additional financing to cope with the new regulations.

One tanner who still holds a custom book tried to import with duty and VAT paid, just to find out how long it would take to get the VAT refund. He was told not to do it by the authorities. Maybe they don't want him to find out how long it takes? Maybe they don't know themselves how fast or slow the wheels of the bureaucracy will turn!

Shoe makers are trying their best to find alternative sources of leather supplies. Indian and Pakistani tanneries are enjoying good business, consequently their leather prices are increasing.

A big tannery in Argentina decided not to increase its leather price, forcing the major Taiwanese tanners who supply the same sports shoe makers to stay in line and not to increase their leather price either. It is said 2006 will be a blood bath for tanners due to cost price increases which will continue to outpace increases in leather prices.

There will also be inequality of cost for tanners in China versus their colleagues in Taiwan and Korea the moment the new Chinese rules are implemented. Unfortunately, China has a substantial excess of tanning capacity which, due to competition, makes general leather price increases almost impossible or at least very unlikely.

Four large capacity upper leather tanneries have been built in Quang-Gang, Fujian. Three are in operation already. It is here they were recently shut down by a farming mob. Since then the Quangzhou Environmental Agency has paid a visit and they were due be re-opened as we went to press. Another four big capacity tanneries (three upholstery and one shoe upper) have been built or are under construction in Haining.

The Chairman of the Communist Party made it clear that one of the major objectives of China's 11th 5-year economic plan is to clean up the environment. The farmers in Quang-Gang used this as the excuse for rampaging over the newly established tanneries.

The environmental agency watchdogs are making more frequent visits to tanneries to make sure there are adequate effluent treatment facilities. This might cause problems since export tanners are running into their peak season during the next couple of months and they can not afford to scale down their production or miss deadlines because of production restrictions.

In 2006 the domestic leather season in China ended two weeks early because of the earlier Lunar New Year but is also slowing down two weeks ahead of normal. Usually one would not see a slow down before May but tanners have been complaining about a lack of orders since mid April.

It is said that Kazakhstan hides (average 32-36 sq ft) dropped about $10 per piece in recent days but this raw price reduction has not yet translated into the wet-blue prices in Central and Southern China. Domestic fashion goes for aniline type leather. Embossed/ printed leather is out. This explains the increased overall interest in China for better quality hides.

In the UK and Ireland, hide prices depend on the individual situation of the seller and are probably connected to the health certificate problem for China due to the discovery of anthrax in Wales. There are sellers who worry about the hides they hold for China and prefer to resell elsewhere even if at a lower price, while others who have no outstanding contracts with China but have their regular customers within the UK or Europe see no reason at all to reduce prices.

The problem seems to be limited to UK 36kg+ hides. Price ranges as a consequence are wide but the bulk of the business is at the bottom end of the ranges quoted.

Italy is very much aware of the Chinese problem. They realize this makes them the major foreign buyer of UK hides and they have started bidding down or even withdrawing from the UK market completely. In Ireland the matter does not seem to have any significant influence on prices. At the lower end of the range there may be a penny off but there are also shippers who have nothing to offer and stick to their high prices.

For all of Asia the much weaker dollar makes UK and other European hides extremely expensive. It is unlikely that at present European levels there is much interest to be found in Asia. Euro and sterling prices will have to come down to reach workable levels but there is no sign of that yet.

The new season lambskins have arrived in Ireland. As usual the season in the UK will pick up a couple of weeks later. For the moment skins are all considered of doubleface quality. No run selections are offered. Türkiye is interested and good business is expected. Whether Türkiye is capable of absorbing both the English and the Irish production once in full season is doubtful, however.

And if China is not buying these qualities, which are likely to be too good and too expensive for their needs, where shall the skins go to then? Nappa is at the end of its season and prices for fellmonger skins dropped. Sheepskins still cost about the same.

Printer friendly version

Email this article to a friend