The leather industry has kept shrinking because of a continuous price fall in international and domestic markets.
According to industry insiders, the price at which leather is being sold in the domestic market at present is the lowest in the last one decade.
With this year's Eid-ul-Azha – the biggest season for rawhide collection in the country – a couple of weeks away, tannery owners are once again in a state of uncertainty over the rawhide of sacrificial animals, citing a crisis of liquid money and inadequacy of bank loans.
They, however, have expressed the hope that the crisis this year will not be as severe as that of last year. This is because the number of animal sacrifices is expected to be lower this year due to the ongoing Covid-19 pandemic, they maintained.
The tanners also said they could not sell their products due to the pandemic.
The volume of export was low mainly because of the fact that the European market was hit hard by the novel coronavirus, which is why products are lying in the factory and capital is stuck, they explained.
Stakeholders said many of the traders in the sector will not be able to make new investments for buying rawhide unless they can manage bank loans. Banks, however, are not showing much interest in giving new loans to them.
Shaheen Ahmed, president of the Bangladesh Tanners Association, said his association is working with the ministry concerned to find out ways to reduce the uncertainty that looms over the rawhide of sacrificial animals.
Amid these times of anxiety, though, the Bangladesh Export Promotion Bureau (EPB) has come up with a bit of good news.
According to the bureau, in the just-concluded 2020-2021 fiscal year, exports of leather and leather products exceeded the target set for the year by 2.3% while the year-on-year growth was 18%.
In FY21, exports of leather and leather footwear increased by 3.6% and 5.53%, respectively, compared to a year ago but leather goods exports fell by 4.66%.
Meanwhile, the tanners association has written to the Bangladesh Bank seeking a waiver of interest on loans taken in the four years beginning in 2017.
Speaking on the subject, Shaheen Ahmed told The Business Standard, "Tannery owners have taken out about Tk1,700 crore in loans from banks, the interest of which stands at about Tk500-550 crore in four years. We want this interest waived because there has not been much business since we shifted to the Savar Tannery Village in 2017. Moreover, we have gone through various crises. The coronavirus pandemic has also dealt a blow to the business."
He added that the leather market in Europe could not return to normalcy because of repeated lockdowns. "If this market becomes normal, leather exports will increase. And if buyers purchase the goods, tannery owners also will be able to recover their capital and invest it anew."
Liquid money is needed to buy leather, mentioned Shaheen, adding that businesses will be able to buy enough leather if they can obtain bank loans.
Besides, there is the possibility of fewer animal sacrifices this time and so there should not be much problem with the skins, he stated.
According to sources, there are more than 200 tanneries in the country. Of them, 181 are members of the Bangladesh Tanners Association and process rawhide to make crust and finished leather.
Tannery owners sell this leather in the domestic market as well as export it abroad.
It may be mentioned that trade in rawhide of sacrificial animals hit a snag during Eid-ul-Azha last year. Even though the price was reduced by about 30% over the previous year, many people threw the rawhide away due to low prices and a lack of buyers.
Last year, the price of the rawhide of cows and buffaloes was fixed at Tk35-40 per square foot in Dhaka and Tk28-32 per square foot outside Dhaka. Besides, the price of goat skin was reduced by about 27% to Tk13-15 per square foot.
Mohammad Rintu, director of MB Tanners Limited, told TBS the crisis over rawhide this year may not be as severe as in the last three years.
He, however, said the coronavirus situation will affect rawhide collection to some extent as tanners could not sell their products and are suffering from a crisis of capital.
Echoing Rintu, Md Emam Hossain, managing director of ABS Tannery Ltd, told TBS that the firm management was mentally prepared to buy rawhide in a large quantity but was worried that it might face a setback due to capital shortage.
Like his fellow businesspeople, Emam also sought proper support from banks to buy rawhide during the forthcoming Eid season.
He added that large-scale buyers around the world are not coming to buy products from them because they do not have a Leather Working Group certificate. "Basically, the leather industrial city is not getting this certificate as it is not fully compliant."
Mokhlesur Rahman, director (Operations and Sales) of the Chattogram-based Reef Leather Limited, said, "About 95% of the country's leather is exported abroad. The remaining 5% is used to make leather products, including shoes, in the country. But the price of leather in the international market has been declining since 2105 and it has dropped further following the outbreak of the coronavirus pandemic last year."
He also mentioned that many entrepreneurs have left the leather industry due to the business slowdown over the past few years.
"Against this backdrop, the government agencies concerned, including the Ministry of Industries, have to take an initiative to save the industry in this situation."
According to leaders of the tanners association and leather traders association, the major markets for Bangladesh's leather and leather products are Germany, Italy, France, the Netherlands, Spain, Russia, Brazil, Japan, China, Singapore, Taiwan, South Korea and the United States.
But in these countries leather and leather products are currently being sold at 20% less than before. This has also affected the domestic leather industry, they said.
They also mentioned that processed cow hides were exported to overseas markets at more than $2 per square foot, which is now being exported at $1.5.
The misery of rawhide traders in Chattogram
A large supply of raw materials for the country's leather industry comes from Chattogram. As a result, 22 tanneries have been established there over the last three decades.
But in the last few years, 21 tanneries were shuttered after being unable to set up Effluent Treatment Plants or ETP amid losses caused by a continuous fall in leather prices.
At present, there is only one company that is conducting leather business in Chattogram through a full-fledged ETP having been installed.
Thus, the leather business in Chattogram has become dependent on a single organisation. As there is no competition in the market, leather traders there are being forced to sell leather to Dhaka-based tannery owners at lower prices and on credit.
During the forthcoming Eid-ul-Azha, about 4 lakh pieces of animal rawhide are expected to be collected in Chattogram, including Cox's Bazar and three hill tract districts. About 4 lakh pieces of rawhide were collected last year also. The figure was more than 5 lakh in 2019.
But, the lone tannery in Chattogram, Reef Leather, has an annual demand for only one lakh pieces of rawhide. Therefore, rawhide traders of Chattogram have to rely on tannery owners in Dhaka to sell rawhide but they, it is reported, cannot benefit much by selling the product to Dhaka-based tanneries.
Traders said they do not get fair prices of rawhide if they sell them to tanners in Dhaka. Moreover, they have to sell the product largely on credit and it takes 8-10 months or even a year to recover the money.
This causes huge losses to traders, especially those who run their business by taking out loans from banks or other sources, they added.
According to traders in Chattogram, salted cow hides are currently being sold at Tk25-30 per sq ft, while those of buffaloes are selling for Tk20-25, those of goats (male) are going for Tk18-20, and of goats (female) for Tk12-15 per sq ft.
During this month in 2019, the price of salted cow hides was Tk35-40 per sq ft, while it was Tk25-30 for buffaloes and Tk20-25 for goats. In previous years, the prices were higher.