Hides registered such low prices that last year 5.5 million US hides ended up in landfills because it was not convenient to process them in the tannery. A waste of natural resources that is continuing also this year according to the Leather and Hide Council of America (LHCA), the association that brings together US tanneries and raw materials suppliers.
The difficulties of the market, crushed by a weak leather demand that seemed to finally recover after two difficult years only towards the end of the year, are now joined by concerns about the economic repercussions of the Covid-19 pandemic which certainly will be heavy but still impossible to quantify. We talked about it with Stephen Sothmann, president of LHCA.
The whole world is fighting the Covid-19 pandemic. Tanning production in Italy and in some other European countries remains halted, what is the situation in the United States?
“As of April 16 the majority of U.S. companies in our industry are operational to some degree, but the situation is highly fluid and changing on a daily basis. Most states have issued mandates to close all “non-essential” businesses, and will be re-evaluated as the situation evolves in the coming months. We are working with member companies on a state-by-state basis to determine whether their operations are considered “essential” based on their local jurisdiction’s mandates. Federal government guidance to date has deferred those decisions to state and local governments. In general, most US hides and skins processors have been deemed essential and continue to operate due to the service they provide to meat packers (otherwise hides would pile up), and many tanneries have likewise been able to remain operational due to the essential nature of their business. Unfortunately, as facilities experience infections of COVID-19 among employees, they are forced to make difficult decisions about whether to keep operations going”.
Given the situation, forecasts for the second part of 2020 are not encouraging for the entire leather industry. Any reason to be optimistic for LHCA members?
“Unfortunately, I believe the forecasts for LHCA members are aligned with the global leather industry as a whole and all will be in an uncertain situation for much for 2020 as the risk of COVID-19 continues. Until there is a vaccine and this crisis is truly “solved” there will be a huge amount of uncertainty that will interrupt normal industry operations from time to time for most of the year. This is unfortunate since the market was finally beginning to turn slightly positive towards the end of 2019 for most US companies. However, I sincerely hope I am incorrect in my forecast for 2020 and things will be better than I currently see them”.
Last year exports of U.S. hides and skins declined from 20 to 30% according to types. Can you explain briefly the main reasons for this drop?
“It is the same problem we have seen for many years, it just became more dire in 2019 – plastic synthetic alternatives to leather have taken market share away from natural hides, skins and leather in too many sectors. The situation is now so bad that we are indeed composting hides at the lower end of quality due to the complete lack of demand for those products. In 2019, an estimated 5.5 million US hides (17% of production) were composted rather than produced into leather. This is a travesty and a massive waste of a natural resource”.
Do you think that global leather demand will remain low?
“Unfortunately we expect very similar figures in 2020, if not worse than in 2019. The prices of many lower quality hides continue to be below the break-even production level where it makes sense for a company to process those hides into leather. As long as the market continues at that low level, many hides will be landfilled rather than processed into a useable leather product. While rendering may be a suitable alternative in some cases, not all regions have rendering facilities capable of handling cattle hides in the US, so the more economic alternative for the meatpackers in those cases is the send the hides to a landfill. Once again, I sincerely hope I am wrong in these forecasts”.