Extracts from the SauerReport

This APLF fair certainly managed to prop up the morale and just the fact that it is back on stage helped to improve the mood and promote trade. The first two days were very very busy but numbers dropped strongly on days three and four.

Far more visitors from mainland China were seen and this was due to the improved visa situation for the mainland Chinese. Visa offices in 16 more cities have opened.

As usual some countries did better than others (Asians better than Europeans and Americans) as did certain sectors from the industry. Chemicals and components are said to have done very well which always gives an idea about the business in general. Much more activity was also noted in the made in China man-made material section but this is hardly positive for the leather industry.

It does fit, however, with previous statements saying that the marketing people of the final product have no problem in switching to alternative material if they find leather too expensive. The whole idea of 'things must get cheaper' was very well demonstrated at the fair. If raw material was cheap, business was usually good. Cheaper origins, types and qualities (cows, low grades, splits etc) were in good demand. Quality is ever more losing out against price.

The good news was that buyers were ready to negotiate prices, while before the fair they would not even react or look at them.

There were countries with more exhibitors than before such as Mexico, Iran and Morocco but quite a number of European tanners chose to stay away. They prefer to exhibit in China they say.

I believe that the Hong Kong fair will eventually reduce in size and the Shanghai fair increase but not that one can replace the other. China still does not offer the same infrastructure, the same facilities, the political situation is never without risk, administration may cause complications etc. The Hong Kong fair is an Asian fair.

The Shanghai fair will be a Chinese fair and it is not hard to imagine that other Asian countries would feel happier in Hong Kong than in China where they will no doubt be absorbed and disappear in the crowd by the simple magnitude of the Chinese presence.

The number of leather fairs in China is increasing every year and the situation is already very confusing. This is another reason why people may conclude they wish to stick to Hong Kong where things are loud and clear for some more years to come.

Split prices practically proved to have reached their top in Hong Kong and this is not totally disconnected from the customs problems in China. Tanners who tried to get a few cents more, finally had to sell at a few cents less and even then in small quantities only.

Looking at the various sectors and regions, it is clear that the automotive leather business is stable (and may even be weaker since the publication of disappointing car sales in the USA in March). Furniture upholstery is improving and shoe business is stable (at a high level in Asia and a low level in Europe). The garment and leathergoods trade is only so so and Italy, Spain and other European industries are suffering. South America is doing well and Asia remains the king of it all.

Brazil entered the fair with a shock, finding out that while many tanners were already on their way to Hong Kong with tons of offers in their luggage (many for prompt shipment), one of the biggest abattoirs in the country (Friboi) suddenly decided to increase fresh hide prices by 0.10 real per kilo.

Tanners wondered if the smaller abattoirs will follow, upsetting the calculations for their leather offers in Hong Kong. Most already had problems enough to sell at the firm raw hide prices of before the fair.

There were also reports about the growing competition between China and India. India can tan cheaper than China but the latter country is much more competitive in the production of the finished leather articles, especially garments. Other countries in Asia can play a part in the overall production process as well in trying to find the most competitive combination.

European companies who see their future depend on a joint venture in China have often burned their fingers. It is not easy to implement. It is said that only the really big groups possess the necessary management, funds, technical know-how etc to control the cooperation.

Other sources fear the day Chinese manufacturers will decide to open shops themselves in the west and market their own products directly to the consumer. It still seems far away but not impossible.

Ron Sauer

ronsauer@wanadoo.fr

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