Chinese demand boosts Brazil’s leather exports

The expansion of the automotive industry is driving the Chinese demand for leather and benefiting Brazil. In the first half of this year, Asia’s largest economy accounted for 40% of the leather and hides exported by Brazilian tanneries. This raw material is used in manufacturing upholstery for electric vehicles, for instance. Given this strong demand, the sector expects to close the year with growth compared to 2023, despite high supply putting pressure on export prices.

From January to June, China purchased 39.17 million square meters of leather and hides, a 33.3% increase over the same period in 2023. These purchases made up 29.9% of the total revenue from Brazilian leather exports.

“During the COVID-19 pandemic, China significantly reduced its production of automobiles and footwear. Now, the market has almost returned to normal, and production and consumption have resumed,” said José Fernando Bello, president of the Brazilian Tanning Industry Center (CICB), in an interview with Valor.

Brazilian leather is not among the highest quality globally due to the practice of branding cattle with iron for identification. Nonetheless, it adequately serves the international furniture, automotive, and footwear sectors—about 80% of the leather produced in Brazil is exported.

This year, with cattle slaughter at record levels, the supply of by-products like leather and tallow has also increased. The latest data from the Brazilian Institute of Geography and Statistics (IBGE) shows that in the first quarter of 2024, tanneries reported receiving 9.32 million whole pieces of raw leather, a 19.9% annual increase.

“With more available raw material, we intensified our search for buyers in the foreign market,” said Mr. Bello. Besides China, Vietnam stood out by doubling its imports of Brazilian leather.

There were also significant sales increases to Italy, Mexico, and Tunisia. Although they reduced their purchases in the semester, the United States remains a crucial market, accounting for 13.4% of export revenue, following China in the importer rankings.

Overall, the sector ended the first half of the year with a 15.4% increase in export revenue, totaling $650 million, driven by growth in area and volume shipped, according to CICB.

Mr. Bello believes the exchange rate will be crucial in making Brazilian leather more competitive this semester. However, he noted that a strong dollar also raises costs, as the local industry imports chemical inputs and machinery.

Despite higher expenses, the CICB expects export revenue to grow by 15% this year, with volumes increasing by 25%. Last year, revenue reached $1.117 billion, with shipments of 430,630 tonnes of leather and hides.

A source from a slaughterhouse supplying leather for processing to tanneries is less optimistic. The source believes there is an oversupply of leather due to high production. “The selling price for the slaughterhouse is very low, for both rawhide and wet blue.”

The following chart shows the volume of skins and leather exported from Brazil to China via maritime means between the first five months of the year from 2021 to 2024. The data comes from DataLiner.

Exports of Skins and Leathers to China | Jan-May 2021 – Jan-May 2024 | WTMT

Source: DataLiner (click here to request a demo)

According to Alcides Torres, director of Scot Consultoria, the prices of the by-product are virtually stable this month, with increases only in Rio Grande do Sul. “Top-quality rawhide is priced at R$0.80 per kilo. In Rio Grande do Sul, the price is R$1.30 per kilo, up R$0.10 compared to last week. But leather is not just about price; it needs quality,” he said.

For next year, the sector is concerned about a new European Union law requiring full supply chain traceability and banning imports of products linked to deforestation starting in January. “We are not against this regulation; we just need more time,” said the CICB president.

Source: Valor International

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