Extracts from the SauerReport

This could have ongoing and more permanent influences on the leather industry and cause changes in the selection of raw materials. Which way it will go nobody knows yet. Development of prices of the usual types of raw material will be deciding factors. Plus fashion, availability and functionality, of course.

Sheep and goatskin business is currently much better than for hides but one should add ‘if you have the right material'. When it comes to European hide prices, nobody knows what the real values are, which basically means everything is possible.

It mostly depends on the personal position/situation of the sellers. Can they wait till after the holiday period, do they need cash badly; have adequate storage facilities to bridge the hot summer months;  believe in a better market from September; believe the dollar will drop or rise in the months to come?

There has been more bad news from Italy. Stories are that in the Santa Croce/ Toscana area alone, ten or more tanners will close down in September or have already closed down.

In Türkiye, activity slows down further. The import ban on South African raw materials made things worse. The local hide market is still attractive compared with imports where there is an import duty of 8%. The end of June was reported as very quiet with 30% of the cheques in the market bouncing.

The doubleface market is still dead. UK lamb kill volumes are still low and the skins sold at about £3. But there are no new offers. It is going to be another tough year for the industry, adding to Türkiye's unique economic hardships which are due to political issues.

At the Guangzhou Fair, tanners said if we stay out of the market, US hides prices will drop. It did not happen. It caught the Chinese tanners by surprise to see the market head in the wrong direction. Currently it is the off season but tanners have to buy hides for August/ September arrival for when the new season starts whether it is good or bad.

Most of the tanners spoken to two weeks ago now say their business came down 30% or even 40% during the second quarter. Olympic Games security is top priority, even at the expense of the economy.

Exporters' fear of disruption during the Games started early this year and in April/May business was good. Unfortunately the early birds were conservative. Now it is said, a lot of Russian or former Eastern Block shoe buyers are unable to get a visa to go to China in August. But if they cannot visit to place shoe orders there will be no leather orders placed either.

China has become the biggest consumer of exports from the Brazilian agribusiness sector, from third largest last year, leading the authorities there to suggest that Brazil is on the way to reducing its trade deficit with China. China imported goods from the sector worth US$3 billion in the first five months of the year, a rise of 86.6% compared to last year.

Representatives of the principal leather industry associations in Mexico have travelled to China to formalize new agreements on imports of leather footwear from Asia. Tariffs were due to come off from the beginning of this year but after street protests in the main leather and footwear manufacturing centre of Guanajuato, the Mexican government negotiated a partial extension. This means tariffs will stay in place for a further three years on 88% of footwear types (principally those made with leather), with trade on the other 12% becoming free immediately.

The organisations travelling to China for this exercise believe the new measures will boost the Mexican leather and footwear manufacturing sector by preventing 30 million pairs of shoes a year from coming into the country from China free of duty.

The Chinese are back for Malawi wet-salted hides but are bidding 15% below their last paid prices. In order to move some stock sales have been made at 10% below last sales prices. Local prices have not changed and it is the exporters who are tightening their belts.

Rwanda has changed its export policy for raw hides and skins. Both Kigali city abattoirs have received an export licence for wet-salted hides. Up-country abattoirs are still smuggling their hides out of the country. Reports from China say that there are offers for hides at US$1.30 per kg CFR but this does not coincide with the prices collected at abattoir level.

East African sheep demand remains high. Goat prices are unchanged. The Ministry of Finance in Uganda announced an increase in export duty on raw hides and skins. The tax is now US$0.40/kg or 40%. Both are the same because the value of the

merchandise has been fixed by the customs at US$1 per kg (whatever the commercial value might be).

This is done because some exporters have undervalued their material on their invoices. What will appear strange and amusing is that for Customs, the value per kilo is the same whether the material is wet-salted, airdried or dry-salted.

Strange as it is, this US$0.40 per kg applies also to airdried and wet-salted sheep and goatskins. When the authorities realize how crazy this is, we shall no doubt see a correction. For the moment, however, it complicates an already difficult trade even more. Please note this new rule only applies to Uganda. In Kenya, the export tax is strictly based on percentage.

The sheep and goatskin trade in Kenya and Uganda is very clear. Strong demand, not enough available, firm prices.

The cattle hide trade, however, is a mystery to many if not all. Be it the raw hide or the wet-blue trade. The raw hide prices at origin remain the same although there seems to be next to nobody who is prepared to pay them.

Why don't they come down? Are there still so many outstanding contracts to fulfil? If so, shippers may as well forget them, traders say, since the buyers, most likely Chinese, will no longer take them at the old prices.

Or is it because the population can no longer afford meat, thus the kill is very low, thus there are few hides, thus the tanners and exporters in the country are keeping prices up because of competition between themselves?

In Uganda the Chinese owners of a tannery there might be responsible. In Kenya it could be the group which has to keep the drums in its tanneries turning.

Wet-blue prices are equally inexplicable. They range from US$0.90 to 1.20/sq ft between exporters. There might be a few possibilities for the low end in Italy, Türkiye or on the sub-continent, but who pays US $1.20?

Printer friendly version

Email this article to a friend