On the final day at ACLE many visitors not hurrying home or on to meetings elsewhere in the region were to be found doing market research in the famous Shanghai Super Brand Mall. An important chance to get a first hand feel for how real the recovery is and how determined the Chinese consumer is to help the leather industry by buying shoes and bags. One trade visitor said, “The shoppers are certainly busy here, this is a very positive sign”.
Gaining knowledge of the final consumer is important since so many visitors to the show were concerned that the Chinese could not make up for the reduction in demand from Europe and the US. It is demand from the China market that will decide whether current raw prices will be stable or whether we will see more problems ahead. This was a point highlighted by exhibitor Michael Rubinovitz of Wet Blue International, who said: “Since I have been here, listening to comments and watching the TV about the strength of the recovery, I am thinking there is an element missing in the analysis: how can the world economy sink so fast and recover so quickly?”
One of the issues running through this year’s ACLE was this issue of rising raw prices. For many international exhibitors, ACLE was the first gathering after the long European holidays and a moment when the industry can get together to search for the rational underlying the current events. Discussions on the stands and in the corridors have been important.
The view expressed in the seminars was that the initial problem for the industry was largely caused by speculation and it is speculation alone that has been pushing prices up in recent weeks. It is clear that the automobile sector cut production very fast and pulled out of buying hides without consideration for the nature of tanning and the longer term supply of raw material. When other leather sectors saw a milder recession than feared, yet raw material at an unbelievable low level some tanners with money in the bank and other traders started buying again. So the discussion at ACLE’s fair grounds appeared to support the view that current hide prices are too high for the level of business being seen around the world. Consumers are not ready to accept raised prices for goods. At the same time Rubinovitz asked us to note that much of this is a US hide issue as hides from many other parts of the world are trading at some 40% below US prices, far below what might be justified by quality differences.
Overall it came across clearly in the seminars and on the floor that the leather trade is recovering from recession yet all parties must be wary about letting speculation lead the trade back into errors. Seminar speakers also expect to see more consolidation and vertical integration in the industry and talked about this mostly at the wet end. More meat companies will get involved in making wet blue and generally from both the US and Brazil they expect to see more trade in wet blue and crust and less in raw. Even automobile upholstery is coming out of Brazil as crust now.
Meanwhile, business continued. Exhibitors were busy until the last moment seeking new relationships, reinforcing old ones, and offering new products.
The Scottish Group held an opening party to celebrate a new joint venture to supply automobile leather to the Chinese market. Zibo Polygrace, now the Chinese arm of Bridge of Weir Leather Company Ltd, is a significant move for the very successful but somewhat conservative Scottish Group.
Thomas Sattler, director of global business management for leather chemicals at BASF said the fair has been “busy”, although he was cautious about the recovery. Trade was certainly better now but it was not clear that the consumers around the world would be able to sustain it once the one off supports such as the US “cash for clunkers” ends. The leading German company - showcasing a variety of new eco products along with their thermal expandable microcapsules (leather Enhancer LT) for helping with lower grades - has already reserved space to return to ACLE in 2010. While over the years they had withdrawn from a number of fairs, Sattler deemed ACLE as a “good place to be”.
Sharing the same sentiment was Sateesh Jadhav of Gaitonde in India, who is now also the secretary of the Indian Leather Manufacturers Association: “This fair has been very successful,” he said. “My aim is to bring more Indian tanners to Shanghai next year”. The China market is big business for Indian tanners. Jadhav said he discovered at this year’s show new consumer trend emerging: “We have found that higher quality leathers are now made into articles which stay in China - and are sold to Chinese consumers -while it is those exporting leather goods and shoes who are looking for cheaper leathers”.
Meanwhile at CIFF, the footwear fair held concurrently with ACLE, first-time exhibitor Nasir Khan came to seek greater opportunities in the Chinese market for his footwear company Jenny Shoes Ltd. The company, which progressively moving from offering semi-finished leather to leather, then shoe uppers and now fully-finished shoes, primarily services the European and the Japanese market but now focuses on China as an important market for the long term. Khan’s tannery will move into the new industrial zone near Dhaka in 2010, which has its own central effluent treatment plant and with carefully chosen European chemicals he is developing what he defines as “ecological” products to meet the specifications of his customers. These are particularly liked in the growing sectors of sandals and driving shoes where socks are not worn.
Khawaja Muhammad Mehr Ali of Mahmood Group of Industries also exhibited for the first time at ACLE, and in Shanghai. Based in Multan, Pakistan - a major crossroads for the collection of Pakistan’s raw materials - he makes finished and crust buffalo and cow leather, 90% for export. They found the fair to be very busy on the first day and subsequently, in the final 2 days, the fair made way for more in-depth, tranquil discussions. Mehr Ali noted that they met existing customers, with whom they’d known from APLF’s MM&T fair in Hong Kong, but for the most they are at ACLE to find new Chinese customers.
Researching new ideas, discussions between and amongst exhibitors and longer more serious meetings were typical of the last day in the Show with the floor a little quieter. By the 3.30 pm the show was over and exhibitors and visitors headed off, many as stated to the Super Brand Mall. Our elderly visitor, who remembered the famous Paris Leather Fairs of the 1960s and 1970s, said “the Shanghai Fair to me is the one which has replaced the Paris Leather Show at its height in the mid 20th century. Shanghai is now the destination, and has the buzz, which Paris was five decades ago.”