Most people in the tanning industry now believe that the current market situation is different from the usual cyclical economic model and that there is a more fundamental change taking place.

Leather is under pressure from other materials, negative media coverage and a growing perception that anything to do with the culling of animals is bad, especially among the generation of people born after 1990.

Each year ILM collects data through its ILM Tanner Business Confidence Survey to gauge the international business climate and assess the challenges that tanners are facing. Our latest survey was conducted in July and the full results were published in ILM September-October 2018 print/digital app edition.

From the survey, 75% of respondent tanners said that they are unquestionably concerned about their customers substituting genuine leather with other materials. They also confirmed that they perceive more negative publicity around the leather industry from both anti-leather/meat NGOs/campaign groups and from the mainstream and social media. 

Historic low raw material prices

Each day ILM’s sister online publication, theSauerReport, publishes market analysis and raw materials prices from a range of sources around the world for its subscribers. We have seen that raw materials prices in 2018 are at or heading for historic low levels. To put into context, it is estimated that raw materials (hides/skins) constitute around 30-40% of a tanners’ business costs.

Mid 2008 marked the point of the Lehman Brothers collapse which came to symbolise the subsequent global financial crisis and crash of world financial markets. Data from that time shows that hide and skin prices were not immune, and the market also collapsed. However, growing demand from China at that time managed to bring about a relatively quick recovery.

Hide and skin prices not only recovered but rose to record high levels peaking in late 2014/early 2015. Since then prices have declined steadily to low points we have reached today. Many leather industry insiders believe that this was the point that many brands and retailers switched away from leather and started to substitute or replace with other materials.

Today, sheepskin prices are at historic lows and the bovine hide trend is following a similar pattern. At theSauerReport we have been noticing for some time now that lower grade sheepskins and more recently lower grade cattle hides are simply being discarded into landfill or burnt as it is cheaper to do that than preserve or store them.

To give you some idea of today’s prices, you can buy a UK domestic sheepskin from a slaughterhouse for as little as 50p (US$0.64) per skin. A few years ago, that same skin could have cost 10 or 12 times as much.

It’s a similar pattern for bovine hides. At the beginning of November, you could buy a benchmark U.S. heavy Texas steerhide for US$36/piece or a U.S. heavy native cow for only US$13/piece. At the beginning of 2017 the same Texas steer hide was worth around US$62 per piece. A 42% drop, and I could provide many other examples of very sharp falls in hide and skin prices.

What has caused the decline?

So, what has caused the current collapse in the market? There are several reasons and the full picture is quite complex. But some of the main influencing factors are as follows:

Firstly, hide supply is outstripping leather demand. The global slaughter has been much higher in 2017 and 2018. Especially in places such as North America and Brazil, who have large cattle herds and slaughter. Despite the current trend for “all things vegan”, the global cull is actually rising driven by fast developing countries, especially China. An estimated 6.5 million extra hides will have entered the supply chain in 2018 compared with 2017.

Secondly, there has been a switch away from using leather in some market segments, especially footwear and garments, and the use of other materials has grown.

Thirdly, there is increasing negative publicity surrounding the leather supply chain mainly around animal welfare and environmental problems largely associated with a small minority of processors mostly in developing countries.

Leather alternatives – a case of greenwashing?

Many of the claims made by various companies, NGO’s and those on social media about the positive benefits of leather alternatives really do need to be scrutinised more closely by product designers and material buyers, especially when it comes to the so-called ecological benefits of many of these materials. 

It does seem odd that with all the negative publicity around plastics at the moment, a very usable by-product from another industry is seen negatively to the point that perfectly useable materials are being thrown into landfill or burned.

If genuine leather is under the microscope for its sustainability credentials then surely it is incumbent on everyone to ensure that alternative materials really are equally tested. Are they as green as they say they are or is it just a case of greenwashing?

Leather has longevity in use

Focussing back to leather. Although not a perfect material, well-made leathers can perform well compared with other materials when it comes to sustainability. Leather is a by-product from the meat industry and itself has many other side products. It has longevity in use and can be recovered at the end-of-life or via offcuts to make other products.

A very good example of this is Elvis & Kresse’s partnership with Burberry to reuse leather offcuts to make other value-added items. There are many other examples.

In terms of recycling, many of the process steps in the tannery can be recycled and many of the more advanced leather manufacturers are recovering water, chemicals and energy from their processes. And maybe, one-day, we may see fully biodegradable leather where nutrients are put back into the soil to grow plants for animals to feed on which in turn makes more food and generates more leather as a by-product. A perfect example of a circular system.  

Why now is a good time to source sustainable leathers?

Raw materials prices are at historic lows which means that tanners should be able to pass on some of this saving to their customers. Global oil prices are rising, and consumers are increasingly viewing plastics as unsustainable and polluting. Demand for meat globally will continue to be driven by growth in developing countries.

Leather is a by-product of another industry, it has longevity in its product life and well-made leather can be renewed and recycled. Many elements of the leather supply chain are continuously looking to reduce both their inputs and outputs during manufacture.

Genuine leather should continue to be included in the material mix for brands and retailers. Leather provides products with a natural, luxurious look and feel which adds long-lasting value to a wide range of products.

Martin Ricker

Content Director, International Leather Maker