Leather Industry Poised to Shine as China Fades in Buyers' Radar.

Chennai: A spike in the cost of Chinese leather and leather products may well turn out to be boon for the leather industry here as the US and European buyers are mulling over plans to step up sourcing from the country. According to industry sources, if the domestic industry gets its pricing right, then it could walk away with at least 5% of the Chinese exports, especially footwear exports. Currently, footwear alone accounts for nearly 45% of the overall leather exports from the country.

M Rafeeque Ahmed, a leading exporter and chairman of Farida Group, told FE China is a major competing nation for Indian leather products in the European and US markets. But in the recent days, Chinese products are getting costlier due to currency appreciation and a spike in labour cost. “We expect a shift in business from China to India. But a clearer picture will emerge in the next 4 to 6 months. The full impact of the shift can be seen say two seasons later,” he said, adding, “If this shift happens, then India would be able to enhance its share of leather exports in the coming years.”

During the current year, the industry is hopeful that the European economy, which is one of the major markets for Indian leather products, would improve further. “There are some positive signs, though not a full recovery. This should help the industry bridge the deficit of 8% to 9% witnessed in leather exports during the year ending March 2010, even if it does not show a positive growth,” he said. The overall leather exports registered a negative growth and dropped to $ 3,289.94 million during April 2009 to March 2010 as against $ 3,598.64 million in 2008-09.

Industry analysts feel that though the high price situation in China is favourable to the Indian leather exporters, the industry is not ready to cater to the demand. “Even a 5% shift from China would mean 25% to 30% increase in production capacity in the country. This calls for further investment from the leather product manufacturers. Even assuming that the leather industry has been keeping 10% of its capacity idle because of the recent slowdown, still it needs to add 20% capacity to meet the demand,” they said. Investment flow would happen only when the players are confident of the profitability and the sustained interest from the buyers. The next six...

Source : financialexpress.com