Turkish leather industry slows down
Despite boasting a long history, Turkey‘s leather indutry produced a far from satisfactory performance in 2004. Although the industry reported a 20% increase in export sales, this was far below target. According to official statistics, total exports of leather and leather goods reached $685.4 million between January and September 2004, an increase of just 2.7% compared with the same period in 2003.
Compare this with Turkey‘s overall exports, that saw an increase of 34% in the nine-month period, and one can appreciate the downward trend that is evident in the leather industry. The situation showed no improvement in the third quarter of 2004 either, leather and leather goods accounted for only 1.5% of total exports compared with 1.9% in 2003.
The industry‘s poor performance has been attributed to several factors including the major fashion brands showing little interest in leather and a change in fashion trends; an increase in the cost of raw hides and skins; the ending of the “suitcase trade“ between Turkey and Russia; rising competition from China; and the falling value of the US dollar. Based on current trends, experts claim that the industry could shrink to half the size in terms of investment and production capacity.
Speaking to World Leather, owner of Akdeniz Tannery Co., Sebahattin Sen, explained that due to the fall in demand and increase in the cost of raw materials, his company plans to halve production in 2005. He noted that in his opinion, although larger facilities will survive, many small tanneries are likely to close.
The Russian effect
One of the main factors influencing the leather industry has been a fall in demand from its main markets such as Russia. The ending of the “suitcase trade“ - worth more than $2 billion per annum – in the second quarter of 2004, had a huge effect on the industry. The “suitcase trade“ declined along with official exports, that fell from $205.7 million to $199.4 million between January and September. However, despite the downward trend, Turkish companies are trying to adapt to the changing environment and some believe that the industry will recover its position due a high standard of quality and design. President of the Turkish Leather Clothing Manufacturers‘ Association, Kadir Uludüz, explains: “For the past two years, we as leather clothing manufacturers have not made any money due to the falling dollar. The weak dollar has seriously squeezed our profit margins. Moreover, the ending of the “suitcase trade“ has affected our sales dramatically.“
EU remains constant
As far as export markets are concerned, the EU remained the main consumer of Turkish leather, accounting for 44% of overseas sales. Exports to this market actually increased in the first nine months of 2004, rising 4.5% compared with the same period in 2003. Germany was the main importer, accounting for 14% of leather exports, with France following with 7%.
In Asia, Hong Kong and China still remain elusive, but these markets remain very attractive and Turkish tanners are attempting to capture a larger market share. Chinese buyers demand high quality leather and as Turkey can meet this demand, the industry now has strategies in place to expand its market share in both China and Hong Kong. But it won’t be easy. Mr Uludüz claims that, due to China purchasing large quantities of raw leather, prices have increased globally and this has had a negative impact on the industry.
IDF fails to impress
The stagnation in the industry was evident at the 2nd Istanbul Leather Fashion Fair (IDF), which attracted fewer exhibitors and visitors than in the previous year. The show, which was held January 13-15, attracted only 172 companies, 150 of which were Turkish, followed by Italy with eight exhibitors. There were 90 leather clothing companies, 64 finished leather firms, and six accessory manufacturers.
Some commented that the event lacked originality and that a lack of promotional activity is having a negative effect on the country‘s industry, while Mr Uludüz stated that the sluggish state across the industry was reflected in the poor attendance at the show, a stagnation that he feels started as far back as 1998.
