Extracts from the SauerReport

As usual nobody really knows the truth but more and more people are convinced that in specific areas tanners will indeed be told to close down during the Olympics (to avoid pollution in clear view). The question now is more about where exactly, than about if. Stories vary from a circle of 200 km to a circle of 500 km around Beijng. Once again, we cannot call this anything more than rumour.

For this reason there are tanners who postpone raw purchases until they are sure about what may happen to them. These are mostly tanneries who know they do not have their waste treatment in order as they should have. Big factories with proper anti pollution facilities can of course continue to operate as always.

Blue algae, which caused the shut down of the water treatment plant at Lake Tai and resulted in no drinking water for the surrounding area for almost a month last year, are coming back again. Lake Tai is the third biggest fresh water lake in China supplying water to 30 million residents.

Some tanners have already been asked to reduce soaking to enable the government to deal with the matter. Tanners hope the government action will ease by end June when they expect the blue algae situation should be in order again.

In Egypt, the industry is quite pessimistic about the near future. While there is hope for better times this is not based on any hard positive facts. The raw hide and skin trade in the country dropped up to 5% because of this pessimistic view. Wet-blue export prices remain the same because of the weak US dollar.

Türkiye is terribly troubled by the food crisis which leaves people with little money to spend on other things like leather products. Although the official average inflation on all products (including totally unimportant products for every day family life) is just under 10%, the President of the Chamber of Commerce in Ankara, a very popular person in the country, explained on a leading news channel that inflation on food was close to 50%. The entire country including the leather industry is suffering.

In Bulgaria, there is demand from Türkiye for doubleface lambskins. Cattle hides, however, are piling up in the warehouses waiting for buyers. The hottest items are pigskins which are in short supply. One of the five or six tanneries left in the country is operated by Portugese who use tons of pigskins to produce shoe lining but cannot find enough raw material to keep all their drums filled. Sheepskin prices have not changed.

The industry as a whole is not doing well. The biggest buyer of doubleface garments from the Czech Republic has reduced his purchases in Bulgaria by some 80%.

In the doubleface market the already bad situation is getting worse. Very large stocks of Merino skins are reported from all Mediterranean countries. English spring lamb are already being offered at 2.50 GBP/piece cif Türkiye and even at this price there are no orders.

Turkish buyers are talking about €5/skin cif and half price for second grades. Suppliers must sell their stocks and it is believed one or another will soon start to give in. For the owners of large stocks the developments can be dramatic. The more since the banks are also getting ever more difficult.

Even the most pessimistic forecast has not foreseen this. It all started when in November 2006 prices began to increase, followed by a crazy speculation in 2007 pushing prices up as high as €15/skin. Then designers backed away from doubleface as fashion and all went down the drain, demand and prices.

It is reported that an important and well known doubleface tanner has only sold 200,000 sq ft so far in 2008. For the tanner in question this is only 2-3 weeks' production. How can anyone survive like that? Company closures are expected.

Hides are getting scarcer in Uganda due to the reduced slaughter of animals. Meat prices have risen from 3,000 Sh/kg to 4,500-6,000 Sh/kg which keeps it out of reach for many local families. One of the reasons for the increased prices are new meat markets in Sudan and the Democratic Republic of Congo from where traders travel to buy in Uganda.

Many farmers now find it much more interesting to sell milk than meat and have switched to dairy farming. This means they keep their animals much longer. Final result for the leather industry is fewer hides from Uganda (and possibly other countries in the region).

The Brazilian Association of Footwear Manufacturers (Abicalçados) has announced that, in the first quarter of 2008, Brazil exported 54.2 million pairs of shoes with a value of US$519.5 million according to data released by the Foreign Trade Department (Secex). These numbers show an increase of 8.1% in volume and 5.2% in value compared to the same period of last year.

However, during the first three months of the year Brazil exported more synthetic than leather shoes. This switch from leather to synthetic materials was already a source of concern for local footwear manufacturers because leather footwear employs more people; they have warned that more jobs could be lost if the trend persists.

On the leather shoe front, 18.5 million pairs were exported at an average price of US$19.45/pair, generating a revenue of US$360.7 million. This represents a 22% drop in volume but only a slight drop in value.

Ricardo Wirth, vice-president of Abicalçados, explained: ‘At the moment, leather shoes are just 34.1% of the volume shipped. Exporting is very difficult these days and most manufacturers are not making any profit. Seven years ago, the US market used to import 80% of Brazil's total footwear exports. Today, it only takes approximately 30%. The overvaluation of the real, the global recession and US financial crisis are being blamed for the current situation of Brazilian leather footwear exports.

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