ACLE fair (ILM automotive conference)

The day before the opening of the fair our partners ILM (International Leather Makers) presented their automotive leather conference at the Jumeriah Hotel in Shanghai. For close to 100 participants specialists in this trade from Bentley, Faurecia, GST Seton Autoleather, BASF and Lectra all predicted that the auto leather segment will grow over the next decade. Something this report has been writing since long but now we have some interesting figures coming from the conference to illustrate this. The pundits there predict a global increase of the auto leather sector by about 5% but by around 18.7% in China alone. In Europe approximately 19% of all cars have leather interior but the figure is closer to 50% in China! Bentley Motors for instance, source 550,000m2 of leather a year, virtually all South German hides. They are part of the Volkswagen group who source 6 million hides and it is predicted that the VW Group will be sourcing around 8 million hides per annum by 2018 (where will they come from, is the question). It takes 22 hides to fit a flagship Bentley Mulsanne (versus 2 to 5 hides for a normal smaller car). Bentley have a low volume car production but source more leather than Skoda, Seat and Lambourgini (all part of the VW Group) combined. To meet future demand Bentley are looking at sourcing hides from different origins in future. US and Australian hides were mentioned as possible sources. We see this as another confirmation of our stories in previous reports stating that the worlds best hides now used for luxury cars will not be enough to satisfy demand and that just by the pure lack of numbers even the better car brands will sooner or later be forced to use less than the best quality hides. Thus a big task is set for the tanning industry and the chemical industry to produce good and acceptable qualities for these cars out of less than the best quality hides.

ACLE – Shanghai Day 1

To our surprise various sources at the fair from different countries all reported to be disappointed by the number of visitors on day one. To be honest we had expected to hear the contrary. Many split tanners from China, traders from Hong Kong and people from India are absent we hear. It is also said the fair is pretty small and consists of 2 halls, one for the raw trade and one for the leather and finished products trade with more space between the stands than usual. We are eagerly awaiting more news about all this and hope it will be more positive tomorrow. European cow hides are being offered at about 90 USD and Brazilian wetblue TR1 at 2.00-2.10 USD/sqft. These prices have indeed been pumped up one can say! A sale of American wetblue hides has been reported at an all time record high price.

India

The summer month have brought no change in the production of goatskins but sheepskins and bovine hides were less. Like in China pollution problems are leading to suspension of production which in some centers lasts already longer than a month. Domestic Business Goat: The holidays overseas and the restricted communication possibilities kept the action for high grade veg. tanned leathers limited. This is expected to last till mid September. For the bigger 5/8 sqft skins the business never stopped and whatever becomes available finds takers straight away. Secondary brands in 5/8 sqft are selling at 52-53 Rs, linings at 46-48 Rs, mesh at 38 Rs and veg.tanned mesh rejects at 36 Rs per sqft. Buyers in North India are taking up the finished skins which makes local traders build up stocks in this. Sheep: Resin nappa business with North India has continued non stop and steadily in the usual combined selection packages. Full chrome low grades are selling at unchanged prices. Cow: Shoe makers kept on buying beige shoe linings at steady prices to 0.25 Rs cheaper. Kip finished upper leathers have been moving all the time also but there is resistance and buyers want to see a small reduction. Buyers and sellers may find each other half way for the continuation of business. Calfskins: Some sales at prices 0.25 Rs down for both cow and buffcalf. Buffalo and buff lights: Unchanged. Export Business – Generally quiet due holidays overseas. Goat: Just this week inquiries coming from France for 4.5/7.5 sqft skins TR1/2. Buyers and sellers are 10 cents apart and negotiations ongoing. Standard linings sell at unchanged prices to Italy. There is interest from Europe for dyed suede but also here there is a 10 cent gap to be closed before business can be concluded. Sheep: Patchy business with Japan in resin nappa. Prices unchanged. These are mostly sample orders. They are still ongoing and it looks like buyers are still not totally satisfied with the results. Some buyers have already sampled 3 times. It is hoped that a solution will be found since the natural skins, which the Japanese really prefer, cannot officially be exported. The solution in the middle applied till now, the white spraying of the skins, attracts neither buyers nor sellers. Cow: Some lining business reported with Spain last week. Buffcalf: Some business reported just prior to the holidays. For all prices see in the report. Raw hides and skins: Light goatskins cost 10-15 Rs less but the heavy 5/8 sqft skins show unchanged prices to even 10 Rs more. Sheepskin prices have not eased despite the Monsoon defects or maybe 5 Rs nominal. Tanners however expect to see a decrease of 25 Rs to make up for the lower quality. Cow hide prices have dropped up to 60-70 Rs. Calfskins are down 10 Rs since the yield is much lower due off-season.

Russia/European Union

A reaction from Italy about the sanctions on the trade with Russia: quote – Surely the Russian ban on imports from the EU will affect our trade but to know exactly how is very difficult to tell at this stage. Besides the many wetblue hides that Italy imports from Russia, we have also to consider the many finished products such as shoes, bags etc which are sold in the Russian market. We hope to find a solution very quickly, but there are already people crying in Italy – unquote.

Argentina

Prices for wet-blue splits are now down about 10% (and a bit more for the lighter weights) from previous quotations. Crust prices are about 5 cents higher than before.

Brazil

Brazilian participants in the Shanghai fair are indeed asking 2.00-2.10 for their wet-blue TR1 as we were advised earlier in the week. This considerable increase must have to do with the higher raw prices announced by CICB yesterday. But if it helps to realize the predicted 200 million USD sales at the fair as was announced elsewhere, is another story.

China

Exports of luggage and bags during the January/June period this year have dropped by 5.5% to 12.483 billion USD sources report. The volume dropped as well as did the unit price. Sales were less in major markets of America and Europe but increased in Vietnam, Mexico, India and Bangladesh. Footwear exports increased during the first 7 months of the year but the figures from the Customs authorities are not very clear. There is talk about a 11.4% increase in July alone and a 3% increase for the January/July period but also of a 11.4% for January/July.

New Zealand

The season comes to an end at the end of the month, and most of the meat companies have their financial year ending on September 30th. All the New Zealand skin producers are at the Shanghai Fair hoping to sell their early/new season salted skins to the Chinese buyers and hoping they will find an outlet here as the pickled pelt market is desperately weak. The suppliers position is very variable, with some producers having sold all their old season material and others still carrying important stocks. It may well be that good bargains are achievable for prompt payment and shipment. Prices have dropped tremendously as can be seen in the price list and are still on a downwards trend. There are important gaps in prices between the different brands according to their stock position and need for cash flow. Sheep numbers fell by 32% over the 2013-2014 season, with a total flock of 29.8 million on June 30th, 2014, continuing a trend that started in 1982, when the sheep population peaked at 70.3 million. More than the double!!