Extracts from TheSauerReport

So, where are all those hides and thus all that leather, needed? In China some will answer. Maybe. I cannot come up with another country but I also doubt China can consume it all.
Close to Asia with its present strong demand and a fast rising American hide market it is only logical that many buyers in the Far East show good interest in Australian hides. The kill is low there as well, however, and the Aussie dollar stronger which makes sellers look for more US dollars. If you want hides and if you want them quick, you have to pay the price.
The Australian sheep and lambskin markets seemed to hit a brick wall mid June and are still a bit dazed from the impact. The supply has been disastrous and demand has been nearly as bad. Skin quality this year has fallen off a cliff in the last two months with low livestock levels impacting the quality of available skins. Meatworks under pressure to supply, are killing inferior quality stock just to keep numbers up.
The Russian buyers have been very quiet this year with only limited interest. Russian garment buyers are being very cautious this year and wary not to hold unsaleable stock. The Chinese boot skin business finally seems to have slowed, possibly out of season or avoiding the poor skin offerings but the frantic purchase of skins has slowed to a dribble.
In Spain, as far as sheep and goat are concerned there is no real news in the market. On the buying side at the abattoirs things are not bad since prices are low and steady. One does not have to spend a lot of time negotiating when buying.
On the selling side things are more complicated. In order to book new business a seller must have the right quality demanded, in the right condition (raw, pickled, wet-blue, crust), the right price, the right size, thickness and grades, agree on payment terms with the customer and be able to finance the raw purchase. The most difficult item is probably the ability to deliver immediately.
Today only a handful of sellers are able to comply with all these conditions. It needs a large stock, a perfect knowledge of the trade and the material, a correct and sustainable grading system and.... finance.
In a number of countries new types of health certificates and licences are required which complicate trade further.
When all put together it becomes clear that today’s trade demands much more professionalism from a merchant than in the past if he wants to succeed. Starting up a new company today from scratch is just impossible because of the time and cost it takes.
Also for existing, even long time, tanners it is very difficult to continue in a profitable way and not all manage. A well known name in the town of Vic has stopped activities. Elsewhere one of the biggest names in small skin tanning is removing all machines from its last factory in Spain and its future is uncertain. Some hide tanners have closed down as well and others are likely to do so. On the other hand there are some who understood the changes needed well and they are doing good business, mostly in very specialised articles. Unfortunately there are not many of them.
The entire industry in Pakistan (not just leather) is severely hit by excessive rains and consequent electricity cuts.
In Italy, money and credit become an ever bigger problem. The market is picking up but who can and who is going to finance and take the risk? From various sources I heard that even one of the very biggest names in Italian tanning has seen its credit limit cancelled.
Traders back from Asia report that the work and satisfaction about orders there is much divided. There are those who have few orders and still carry plenty stock in raw and finished and there are others who have orders and are in urgent need of raw material which sometimes they cannot even find.
Those who seem best off are the car leather tanners and the better quality upholstery tanners. Calfskins tanners who make top quality shoe leathers are also doing well. Those who have reasons to complain are the tanners of cheaper type shoe leathers, handbag leathers and low quality upholstery. This explains why Asian tanners have been chasing hides in the countries where the better hide types are produced.
An increasing number of Chinese car leather tanners are moving further into the cutting and sewing business. This makes them very flexible in their hide buying. They buy qualities from top to bottom if the price suits. The best hides go into the front seats (classic European tanners may discover that their favourite hides have gone to China) and the lower qualities are used for panels, seat backs, steering wheel covers etc. The power of this system is that the cut and sewn manufacturer finds a destination for every piece of leather, good or bad.
Analysts also think that with the development of hybrid cars, dual fuel and other eco types, the use of leather will increase. This they base on the fact that the number of eco cars will increase strongly over the years to come, that these cars are expensive and that thus the extra for a leather interior does not weigh that heavily on the total price of the vehicle.
In Brazil, the national association CICB published very sad figures for the first half of this year. The exports of raw, wet-blue, crust and finished leather are 54% lower than for the same period last year. Value remained just under US$500 million. However, things have been better since June and, of course, all hope that the new trend upwards will continue. Nobody expects really big improvements for the second half of this year but for next year most are optimistic.
My source in China reports: The reduced kill in the USA, especially the estimation of close to 200,000 hides less for July, has scared certain Chinese tanners, especially those who defaulted on expensive contracts who now fear suppliers will use the opportunity not just to demand more money but also not to ship the cheap contracts.
The Chinese tanners needed hides to arrive from the end July for their leather sales season from August through December. The volume of export leather orders especially for shoe export to the USA or Western Europe can no longer compete with domestic Chinese leather demand (part of which is used for export to Russia and former Eastern block countries) and thus the influence of the export tanners on the hide market is less than in previous years.

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