LEATHER AND LEATHER GOODS

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
June 4 - 10, 2012

Leather industry, including leather products, is the second largest export-earning sector after textiles. Leather industry is a major contributor in the economy of Pakistan and has potential to multiply volume of exports with the improvement of quality and diversification indifferent range of products, specially garments, and footwear.

Basically, it is a job-oriented industry providing employment to a very large segment of the society besides earning foreign exchange for the country.

EXPORTS OF LEATHER ( JULY - JAN, 2012)

LEATHER VALUE (RS. MILLION)
Tanned/curst hide/skin bovine ani. 290.20
Tanned/curst dress bovine ani. 9,115.44
Tanned/curst hide/skin sheep/lamb 167.46
Tanned/curst dress sheep/lamb 2,827.77
Tanned/curst hide/skin goat/kids 33.47
Tanned/curst dress goat/kids 7,074.47
Leather ns 2,089.67

The leather industry consists of six sub-sectors namely tanning, leather footwear, leather garments, leather gloves, leather shoe uppers, and leather goods.

Today, Pakistanis are among the leading countries in the production of leather garments and gloves. Ten years ago, it was the fifth most important export industry in the manufacturing sector. During FY2011-12, the exports of leather and leather goods have dropped by 10 per cent due to increase in input cost and growing energy shortage and water drought like situation in the country.

It is also expected that it would further decline by 10 per cent during the next quarter. Trade development authority of Pakistan (TDAP) assured their full support for facilitating the development and export of leather industry, especially to stop the smuggling and misdeclaration in export of wet blue leather.

On the other side, Pakistan tanners association (PTA) has demanded of the government to impose a complete ban on export of live animals, increase duty on wetblue as the aftermath of smuggling of live animals to Iran and Afghanistan, and restore smooth gas supply in order to save the ailing tanning sector in the country.

The increase in petrol prices and shortages of gas supply has also impacted the leather industry, which is already on the verge of collapse.

Pakistan's exported leather amounted to Rs3,251.37million as against Rs3,027.66million in December 2011 and Rs2,988.83 million in January 2011 showing an increase of 7.39 per cent over December 2012 and by 8.78 per cent over January 2011.

Exports item during July-January, 2012 totaled Rs21,598.47 million as against Rs20,834.96 million during the same period last (SPLY) year showing a rise of 3.66 per cent. In terms of quantity 14,171.623 sq. meter of leather was exported during July-January, 2012 as against 15,297,539 sq. meters exported during SPLY showing a decrease of 7.36 per cent.

The main buyers of leather during July - January, 2012 were Hong Kong (Rs5886.79 million), Italy (Rs2531.37million), China (Rs2518.45million), Korea (Rs2332.64 million), Turkey (Rs952.39 million), Germany (Rs792.90 million) and Vietnam (Rs741.58million) whose combined share in total exports of leather was 72.95 per cent as against their combined share of 73.01 per cent during SPLY.

LEATHER MARKETS

The market for leather clothing in the EU is large and has contracted since 2008 due to the recession especially in the southern and central EU countries. However, in the large EU markets and some of the eastern EU markets, in the last two years, there has been an upward trend.

In Germany, France, and UK, sales picked up in 2010 thanks to the continued shift from formal wear to casual and leisurewear, with more rustic and smart casual and sporty designs in leather clothing.

Jackets are most common, and take up the largest pan (80 per cent) of the leather clothing market. Nowadays, leather is highly fashionable and many well-known designers include leather in their collections on the catwalks in Milan, Paris, London, or Copenhagen.

The EU leather clothing market valued 47 billion in 2010; this represented approximately 22 per cent of total EU clothing sales (208 billion).

Despite the recent EU contraction, (-0.8 per cent since 2006), global demand for leather clothing continues to outpace global production. To put the EU demand in context, just over 2.1 billion of leather clothing were manufactured in the EU in 2010.

Much EU production was exported, the majority of which was destined for other EU countries and increasingly to the so called BRIC countries (Brazil, Russia, India and China).

The market has become very competitive particularly in these uncertain economic times. Fast fashion retailers continue to provide new ranges in lower quality leather and products in faux leather or man-made material (leggings, jeans trousers). This has resulted in a downward pressure on prices and in most EU countries in increasing demand for imported leather clothing. Especially, now that imports from the larger supplying countries China and Turkey decreased since 2009.

With the correct market approach, DC exporters could benefit from this opportunity. With regards to per capita consumption, Italy ( 143 per capita), Austria (153), France ( 139), Denmark (132) and most of the other Scandinavian countries would be of interest to DC exporters. In addition, Italy, France, UK, and Denmark play an opinion-leading role in new fashion trends. Spain, the Netherlands, Belgium have a high proportion of young and middle aged people who spend much on leather clothing and who are more receptive to new designs.

Germany (8.8 billion) and Italy (8.6 billion) had in 2010 the largest expenditures on leather clothing. However, the consumption in France, UK, and Spain were also important, particularly for women's leather clothing. These top five countries account for 78 per cent of the entire EU market for leather clothing by value.