Last week, all eyes were on the APLF fair in Hong Kong. This fair is traditionally characterised by a completely different spirit and a completely different structure of visitors and exhibitors compared to Lineapelle in Milan.

The number of exhibitors and visitors did not appear to be significantly different from last year. Turkey, Pakistan and to some extent Italy were represented with a relatively large number of individual stands of tanners. Turkish tanners are finding good sales in China for many speciality items, especially sheepskins, and this is also reflected in the exhibitors and products.

In addition, there was a remarkable number of Indian representatives who were looking for potential suppliers for their customers in the leather industry. All in all, this symbolised the impression that the Indian leather industry and, by extension, the footwear industry there are benefiting in particular from the current relocation of production from Europe and from China.

Otherwise, almost all of the large, well known Asian mass manufacturers were represented at the fair, even if one or two names that were represented with impressive stands in previous years were absent this year.

There was a clear decline in the number of visitors from the Chinese industry. The shift to the All China Leather Exhibition in Shanghai cannot go unnoticed. However, this cannot be the only reason for a smaller number of Chinese companies exhibiting in Hong Kong. This must also have a lot to do with the fact that Chinese companies do not expect too much from visiting the fair in Hong Kong.

Visitors gave the impression that there were clearly more people interested in selling than in buying raw materials or leather. All in all, we had the impression that the very special excitement that used to be a feature of the first few days of the fair was barely noticeable this year. It seems that almost everyone has come to terms with the current situation, both in the industry and geopolitically. With the erratic, daily decisions of the US administration, it is currently almost impossible to make any plans or decisions for the future with any degree of reliability. Of course, this is also reflected in the leather industry.

Who knows today which products and which countries will be subject to which tariffs on imports and exports in the near future? It is therefore virtually impossible to plan supply chains in the leather industry at the present time and this adds to the fundamental problem of leather use. For this reason, the leather industry is trying wherever possible to relocate its business to regions that may not be affected by the trade war, either in the very short term or in the longer term. Of course, it is very difficult to judge at the moment whether this can actually be said reliably for entire regions already.

In any case, it is clear that producers from countries that are not currently the focus of possible tariffs are much more confident about the business situation than Chinese manufacturers are. 

Large, established companies are not completely satisfied with their order books at the moment, but overall production capacity utilisation is still relatively stable for them. The same applies to smaller companies that are involved in producing special leather of various kinds, materials that clearly stand out from the general offering that the large companies cover with their volume production.

The situation is most difficult for medium-sized producers. They are neither in a position to deliver anything special, nor are they able to keep up with the prices and demands of larger companies. The cost of operating a tannery above a certain size can only be passed on to customers if there are very large quantities of leather involved. 

The topic of the alternative use of hides and splits comes up again and again. In this context, it is noteworthy that that the prices for lime splits in China have once again fallen significantly in recent weeks.

Those who had travelled to Asia before APLF reported full warehouses and generally no great buying interest. This may come as little surprise in view of the developments of the last few months, but of course you always have to remember that we are now entering the summer half-year, which is generally weaker in terms of production. Summer temperatures will also not encourage anyone to hold more stock than they absolutely need to. 

It is of course always true that you cannot really allow major interruptions in the supply of raw materials, as the delivery times to Asia are too long and surprises in international logistics can never be ruled out. In the end, however, it always comes down to the fact that production capacity will have to be adjusted to real business levels at some point and it is difficult at the moment to get a clear overview of where the balance will lie in the end.

One thing that is certain is that it will need an intensive trigger or stimulus to bring capacity utilisation in the leather industry back to a normal level. Only fashion, consumer interest in something different or the function of leather as a material can help. Many other parameters that have been repeatedly emphasised for some time will not have any positive effects. If this does not succeed, the trend of no longer using all hides for leather production will continue. Until then, the ‘status quo’ of production, consisting of a few large manufacturers linked to international brands and a large number of small specialists and niche manufacturers, is unlikely to change. Those who do not belong to these groups will probably continue to face difficult times.

The market for splits is still very mixed at the moment. In China, as mentioned, falling prices for lime splits are being reported, while in Europe, lower leather production is supporting prices. The demand for wet blue splits is stable, especially in Asia, and the same applies to prices. Inexpensive suede leathers are well represented in the collections of mass manufacturers.

Successful niches have also emerged for lambskins and sheepskins. The fine-wool, small skins, which are a successful fur alternative in China, are particularly striking. The prices for these raw materials have increased significantly in recent months and good interest and business for them was reported at APLF. Increased prices for coarser wool also makes the use of skins an interesting alternative again. The proceeds from the wool are now sufficient to cover the costs of the raw material. Now it depends on whether a market can be found again for nappa leather. The chances are not bad. It can no longer be down to the price.

APLF did not provide any major new insights. It only confirmed what everyone already knew. The overall demand for leather is shrinking and is focused on the areas mentioned above. We are now facing a weaker summer half-year. The erratic policies of the US government, weak demand in the Chinese domestic market and geopolitical uncertainties are also having a negative impact on demand for leather.

However, the main problem remains that the material itself has lost its appeal for many.

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