Barring unforeseen circumstances, genuine and synthetic leather processors, and finished goods makers have no plans to raise prices in the months ahead.
After climbing 10 percent in October 2010, leather costs in China stabilized in March 2011. The rise in quotes last year, coupled with increases in other manufacturing inputs, led makers of finished leather goods such as shoes, apparel, bags, accessories and furniture to raise export prices 10 to 20 percent during the latter half of 2010.
|Baotian uses aniline or top-grain cowhide, or cow split on its range of leather furniture. Some models may be mixed with PVC leather, or microsuede.|
But quotes are likely to remain at the same level for the rest of the year due mainly to an oversupply of the processed material.
Suppliers of finished goods have no intention of increasing export quotes this year as well. But wary of any sudden developments that may affect manufacturing costs, many of them now prefer to accept short-term orders so price adjustments will be faster and easier.
The cost of synthetic and genuine leather, for instance, may climb back up should the tumultuous situation in the Middle East intensify and pull up crude oil prices.
Current genuine leather prices are 5 percent higher than they were in Q4 2010. Grade A cowhide presently costs $4 per square foot, while grade B versions are $0.23 to $0.30 less expensive. Grades A and B pigskin are $3 and $2.90 per square foot, respectively.
PU leather with a 0.7mm-thick nonwoven base and a 1.45m width was priced at $1.27 to $1.46 per meter in October 2010. Quotes rose to $1.55 per meter by year-end before dropping to $1.39 per meter in March. These prices include the 17 percent VAT, of which 13 percent is refunded to makers.
PU leather is generally 100 percent more expensive than PVC versions. But there are some types of PU that may cost up to 300 times higher, including those that require special finishes and treatments.
More than 80 percent of domestic leather output is low-end. Midrange and high-end genuine leather is imported mostly from Italy, Australia, India and Brazil.
One of the reasons behind the slight increase in leather prices is higher raw material costs. T/C fabrics often used as the base for synthetic leather became 5 to 8 percent more expensive in Q4 2010. Costs have stabilized since.
Meeting environmental requirements is the second factor. Since 2010, many genuine leather factories in Hebei, Guangdong, Zhejiang and Fujian provinces have had to close down or invest in wastewater processing improvements to meet local standards. China Leather Industry Association general secretary Su Chao Ying estimates 1,000 factories with annual output topping out at 30,000 pieces have been affected so far.
The leather processing industry has low technical barriers, making it easy for suppliers to join the line. As a result, the sector is already saturated. Although most of the companies are small businesses with low annual capacity, the large supplier base has resulted in combined output that exceeds actual demand.
Note: This article "Stable leather prices in China" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.
All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.
Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.