The summer continues to drag on for the Mexican leather business. Regardless of tannery size, most tanners are currently enjoying a 1-2 week holiday along Mexico’s lovely Riviera, soaking in the glorious sun and ocean breezes. This general rest and relaxation is not only long overdue for what has proved to be a most challenging year but, additionally, they are taking advantage of this slow period with hopes of returning with renewed strength for the autumn tanning season, which has always proved to be strong and profitable.
I have never quite seen it this slow. Everyone is hoping for September to come around since that is when the business traditionally picks up due to the winter/Christmas flow of orders for the Mexican hide tanners.
Despite a recent increase in the last two weeks in big packer hide prices here in the USA, this reflection has yet to materialise south of the border. This time of year is considered slow for the entire leather industry worldwide. European tanners normally shut down in August. However, the opposite normally takes place in Mexico in August, when the business truly begins to signal strength.
Given current market information and general commentaries from those Mexican tanners available in the last few days, the normal busy trend may not continue this autumn with all or most Mexican tanneries. A very unusual situation is, in fact, taking place; one which I have never seen in my many years in the business, especially working exclusively in the Mexican market.
While it is easy to make a general statement with regards to lack of liquidity and the weak peso, the fact is that there are some tanners, very large tanners, who are so busy they cannot satisfy their needs for hides at the moment. They continue to quickly cover their truckloads at the border in order not to experience any hiccups in their massive production vis à vis the orders being placed by local shoe factories to cover the upcoming school year just around the corner.
The American hide trader is experiencing an irregular mid and smaller size Mexican tanner today, such as has never been seen before. The trader finds the regular, consistent tanner, who buys hides all year round, regardless of both currency fluctuations and liquidity issues, is, for the first time, completely on hold with regard to his purchases.
These tanners, albeit of middle and smaller ranges in size, are normally very consistent. Yet, they have truckloads at the border and no incoming funds to continue their production. They want and need the product desperately, but just cannot convince their clientele that production will cease if payments are not received.
The fact is, the end leather user today will delay payments, knowing perfectly well the situation is difficult for the majority of the smaller tanners and also knowing they can easily obtain extensive credit terms from some other tanner anxious to increase his clientele.
In a previous issue, I mentioned 2003 as a very decisive year for Mexican tanners. As the months pass, it is evident these middle and smaller sized tanners will not survive these customer tactics being used against them. The larger tanneries have a much stronger financial basis and, in fact, local banks are now once again extending credit with accessible interest rates to them. They, in turn, realise that in order to survive in an extremely competitive market, they must continue to extend credit.
August is upon us. The next few weeks should prove to be very interesting in terms of defining future history for what has been a five centuries’ old industry which has certainly characterised Mexico. Darwinian law in terms of survival of the fittest knows no boundaries.
Ana Veloso
Barrett Hides Inc