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Fair Director Perrine Ardouin looks ahead to APLF and considers factors that could have an impact during the show.
| 14 February 2018

APLF 2018 about to get underway

After the positive performance at the 2017 APLF event, the run-up to the 2018 fair has been fast and dynamic with the main tannery hall sold out almost three months before the inauguration of the 2018 event due to start on 14 March.

APLF Director - Perrine Ardouin

Since the end of APLF 2017 leather prices have gradually declined down to levels not seen since the height of the 2008/2009 financial crisis due to a supply overhang. For example, at the time of writing Hidenet reports that there are still some 4.3 million hides sitting in warehouses in the US that have been sold but not yet shipped.

Latest figures on cattle-on-feed inventory from the USDA indicate a rise of 8% compared to the same date in 2017. This should result in increased slaughter in the near future. There does not appear to be any tightness on the supply side as far as one can see and prices should remain attractive so that tanners’ margins are not under too much pressure.

For several months now Brazilian wet blue, full substance TR1 has been stuck in a range between US cents 90 and US$1 and can compete with US wet blue which has become more price attractive especially for Italian tanners due to persistent dollar weakness against the euro.

On the demand side it is still automotive and furniture upholstery leather where the main demand is coming from. Furniture Today, for example, published a survey indicating that 29% of upholstery was made from leather. The international car market has grown to record levels in 2017 reaching 90 million units sold of light vehicles (cars and SUVs). The result has been that specialist seating firms such as Lear, Faurecia and Adient have had record years. 

Volkswagen took over the mantle of the world’s biggest car manufacturer in 2017 from Toyota and premium / luxury makes such as Audi. Mercedes and BMW continue to sell more and more new vehicles especially in China. Demand shows no sign of easing although the outlook in the US is flat for new vehicle sales in 2018. Nevertheless, this will continue to generate demand for auto leather in a market where there is an overall abundance of leather due to supply side factors.

Classic auto leather interior

But it’s not just about price………
The main concern for the leather sector, however, continues to be footwear. Since late 2014 leather started losing market share to synthetics as it has “priced itself out of the market”. And now, despite prices that are at least 55% lower than the peak, it has not managed to “price itself back into the market” as other factors have ensured that synthetics are holding on to the market share they gained three years ago.

The main factor is that designers now feel comfortable with synthetics, especially for sneakers, so it is not just the price factor that is decisive for leather to regain market share. It is the flexibility of synthetics and the variety available. Tanners must concentrate on leather’s benefits such as it being sustainable and biodegradable; has inherent beauty and longevity. 

Tanners need to create attractive designs using leather which could turn designers’ heads as a rising oil price will eventually eat into brands’ profit margins as synthetics become more expensive as is expected this year.

These are the type of conversations that one might hear in the aisles of APLF and almost certainly in the Leather Naturally! Club and from many of the top class tanners that will be present at the fair.

Latest news just in from the Chennai leather fair indicates that there is more interest for show leather but we will have to wait until the end of Q1 for this emerging trend to be confirmed. If so, it will be good news for many tanners.

Backdrop to the Fair
Global stock markets have been rising to record levels this year and despite recent price corrections still reflect a positive growth outlook. The last IMF growth forecast for global GDP issued in January 2018 notes that the stronger momentum of 3.7% experienced in 2017 is expected to carry into 2018 and 2019, with global growth revised up to 3.9% for both years.

Bain & Co reported that luxury sector sales in China had increased by 20% in 2017 – a startling rebound from the doldrums the market was in during 2016 and this trend looks set to continue into 2018.

Consumer confidence is buoyant in the US, Europe and China. European GDP has shown its best performance in the last decade and India’s economy is also expected to grow by 7.5% in 2018 according to ministry forecasts.

Interest rates and inflation rates remain low in industrialized countries where most of the demand for consumer goods comes from.

Hong Kong Convention and Exhibition Centre - Home to APLF

Overall APLF-Leather will be held in an extremely favourable economic environment this year and leather expert David Peters of DLP Advisers sums up the outlook for 2018 as follows in his blog published 30 January on Leatherbiz:

“So, with the exception of shoe leather, the prospects for 2018 are good and combined with ample hide supplies, tanners can expect raw material prices to remain trapped in a relatively narrow range. Currently consumer confidence is reflected by good retail sales and echoed in the performance of US stock indices.”

The Organisers look forward to greeting you to APLF 2018 and please look out for further information releases on the event agenda at the fair that makes APLF not just a “trade fair” but a complete integral event that is the Meeting Place for the Global Leather Industry.