Hide Export (Chapter 41) sets a record of US$ 1 billion in seven months 20 million units sold / Only 30% of added value!

Brazilian continues export of large quantity of raw material. Out of the 20 million bovine hides exported (see table 4) 60% are of very low added value, 10% of Semi-trimmed hide and 30% of Trimmed hide, the hide with the highest added value. The ideal would be to export finished products - footwear, leather goods - but as this is impossible, what the country should have is at least an export policy that would benefit the export of a high added value hide. The Federal Government is commemorating the contribution of the hide segment to the Brazilian balance of trade and apparently does not care about the quality - from the added value point of view – blind by the growth of 29% in export value during the first seven months of 2006. The export cumulative of chapter 41 of the NCM (see table 5) – from January through 2006 – exceeded the barrier of US$ 1 billion (only of bovine hide, US$ 955.5 millions). The market estimates that export of chapter 41, plus the “leather goods”, may reach by the end of 2006, the approximate amount of US$ 1.8 billion. The export data, with specific highlight to the bovine hide, can be seen in tables 1 and 2, and report the behavior of the first seven months of the year in quantity and value.

The comments mentioned below, inserted between the tables conduct us to a discouraging evidence. Every month and year, the incentives that encouraged the segment to fight for adoption of measures to revert the historical curve in favor of the Wet Blue are disappearing. Nothing else is being proposed. Not even the application of a tax on export of Wet Blue at realistic level, nor the use of the amount collected in tax in a commercial promotion in favor of the added value hide, and at maximum nor fixing a limit of quantity. The segment has just accommodated itself.

 

Table 1 - Leather Exporation / By Nº of Hides / January to July – 2006 x 2005
Kind of leather	Jan/Jul 2006	Jan/Jul 2005	2006/2005 (%)
Salted	123.263	112.065	9,99%
Wet-Blue	12.016.249	8.795.030	36,63%
Crust	1.928.402	1.862.817	3,52%
Finished	6.166.103	4.790.353	28,72%
Sub-Total	20.234.017	15.560.265	30,04%
Soles	105.525	64.703	63,09%
Sheep	375.831	247.274	51,99%
Goats	161.188	386.942	-58,34%
Total Geral	20.876.561	16.259.184	28,40%

Fonte: SECEX / Organização: COUROBUSINESS

 

Table 2 - Leather Exportation/ By Value – US$ 1.00 / January to July – 2006 x 2005
Kind of leather	Jan/Jul 2006	Jan/Jul 2005	2006/2005 (%)
Salted	1.211.506	2.443.833	-50,43%
Wet-Blue	341.622.419	240.836.705	41,85%
Crust	125.480.189	125.048.131	0,35%
Finished	487.219.682	373.581.234	30,42%
Sub-Total	955.533.796	741.909.903	28,79%
Soles	8.220.308	5.064.471	62,31%
Sheep	5.268.577	3.860.765	36,46%
Goats	1.800.207	1.589.145	13,28%
Total Geral	970.822.888	752.424.284	29,03%

Fonte: SECEX / Organização: COUROBUSINESS

 

Table 3 below, that represents the average exported amount, based on the type of bovine hide, shows a slight recovery in the Web Blue and Trimmed hide prices - the ones with the highest sales - approximately 3,82% and 1,32%, respectively. The hide value, in general, follows the behavior of the international prices of other commodities, dropping down and increasing as is the case. It is interesting to glance, even if not deeply, at the average prices of the Wet Blue and Trimmed hides. While the first has a value of US$ 28.43 the unit, the second item reaches the amount of US$ 79.02. Even with a drop in the international price of both hides, the difference between the two types is extremely significant. What would the reader prefer, selling Wet Blue or Trimmed? What type of signal - through public policies, should the government give to the private segment, clearly showing its intention as responsible for the industrial policy? Omit itself, and so allow a on-going growth of raw material export or incite export of high added value hide? A brief exercise, even if only as an example, shows the cost of the lost opportunity.

From January through July 2006, 12.016.249 hides were exported as Wet Blue, resulting in an amount of US$ 341.622.419. If, instead of Wet Blue, all this quantity would have been exported under the Trimmed type, the total amount would reach US$ 951.686.920. The difference – US$ 610.064.501 – is the cost of the lost opportunity, the cost of absence of public policies. Export of Trimmed hide, which is also a raw material, would not be desirable for any country that looks for development. But the omission as related to Wet Blue, a raw material of extremely low added value, is unacceptable. And even worst it would be, as shown hereafter, when we get aware of its destination and use.

 

 

Table 3 - Leather Exportation / Average exporting value / January to July – 2006 x 2005
Kind of leather	Jan/Jul 2006	Jan/Jul 2005	2006/2005 (%)
Salted	9,83	21,81	-54,93%
Wet-Blue	28,43	27,38	3,82%
Crust	65,07	67,13	-3,07%
Finished	79,02	77,99	1,32%
Sub-Total	47,22	47,68	-0,96%
Soles	77,90	78,27	-0,48%
Sheep	14,02	15,61	-10,21%
Goats	11,17	4,11	171,94%
Total Geral	150,31	145,67	3,18%

Fonte: SECEX / Organização: COUROBUSINESS

 

Table 4 shows the percentage participation of each type of bovine hide as related to the total export in quantity. It is this fact that evidences in a clear way the omission that directs to the export of 60% of extremely low added value hide. The ideal would be an export of 70% of Trimmed hide, but as years go by, in spite of the slight growth in export of this type of hide, the supremacy of the Web Blue in unquestionable. In 2005, a process for reduction in participation of the total Web Blue started and has even been interpreted as a market trend, this means, export of Semi-Trimmed (Crust) and Trimmed was growing in larger proportion than the Trimmed hide. But it seems that this proportion stabilized at the approximate level of 30%, while export of the Semi-Trimmed lost in share. Based on another line of analysis, it is possible that the Curst is being exported as Wet Blue, and this would explain the performance of these hides.

Table 4 - % participation in Quantity exported / January to July (2006 and 2005)
Kind of leather	Jan/Jul 2006	Jan/Jul 2005
Salted	0,61%	0,72%
Wet Blue	59,39%	56,52%
Crust	9,53%	11,97%
Finished	30,47%	30,79%
Total Geral	100,00%	100,00%

Fonte: SECEX / Organização: COUROBUSINESS

 

Table 5 - BRAZILIAN EXPORTS OF HIDES AND SKINS (CHAP 41) – Jan/Jul 2006/05
VALUE (US$)			GROWTH (%)			QUANTITY (KG)		GROWTH (%)
MONTH	ANO 2006	ANO 2005	VAR06	MONTH	ACUM.	ANO 2006	ANO 2005	VAR06	MONTH	ACUM.
Jan	112.481.705	97.449.804	-15%	15%	15%	30.483.749	22.644.786	-6%	35%	35%
Feb	128.958.715	101.471.017	15%	27%	21%	31.997.736	23.377.850	5%	37%	36%
Mar	161.725.650	122.187.437	25%	32%	26%	39.680.467	29.800.210	24%	33%	35%
Apr	140.157.676	113.099.501	-13%	24%	25%	33.111.749	26.087.296	-17%	27%	33%
May	160.020.644	120.655.231	14%	33%	27%	36.391.707	29.390.983	10%	24%	31%
Jun	159.964.493	120.653.255	0%	33%	28%	36.831.446	28.988.239	1%	27%	30%
Jul	150.025.144	106.650.291	-6%	41%	30%	29.189.122	24.891.944	-21%	17%	28%
Aug		135.312.293					32.577.877
Sep		121.855.923					29.604.619
Oct		110.926.696					27.746.306
Nov		118.918.700					29.488.381
Dec		131.948.845					32.259.912
Total	1.013.334.027	1.401.128.993				237.685.976	336.858.403

Fonte: SECEX / Organização: COUROBUSINESS

COUROBUSINESS has also dedicated itself to comment the destination of the Brazilian hide exports. Historically, Italy has always been the preferred destination of the Brazilian hide and in separate, continues being so. In 2006, through July, 31.69% of total hide export had this country as destination. The situation does not disaggregate the information, but it is known that almost all hides were of the Wet Blue classification Hide is sent to Italy , the Italians transform it into high value footwear and obtain the best part. China , summed with Hong Kong , already purchases 45%of the Brazilian hide In this case, the situation is even more serious. The Brazilian hide reaches China and is transformed in low added value footwear which is exported to the United States and there takes over our market. This means, the Brazilian hide contributes to compete with the Brazilian footwear. The major ten destinations continue corresponding to 90% of the total. In the 10 major destinations, Asia represents 49,22%; Europe, 32,61%; South Africa became one of the major 10 and purchases 1,64% of the total, and the United States with its policy not to buy Wet Blue, reaches a total of 3,38% of the total, but which represents 11,75% in value, as it buys Semi-Trimmed hide of reasonable added value. COUROBUSINESS continues under the impression that the Brazilian commercial promotion action should benefit the countries that buy added value hides.

 

TABLE 6 – DESTINATION OF HIDES AND SKINS EXPORTS BY COUNTRIES (CHAP 41)
COUNTRIES	VALUE		PERCENTAGE		QUANTITY		PERCENTAGE
Jan/Jul 06	Jan/Jul 05	PART06	CR.05/06 GROWTH	Jan/Jul 06	Jan/Jul 05	PART06	CR.05/06 GROWTH
Italy	264.361.971	186.951.590	26,09%	41%	75.323.404	50.971.584	31,69%	48%
Hong Kong	192.787.638	137.622.705	19,03%	40%	67.601.310	54.466.891	28,44%	24%
China	160.434.987	122.501.467	15,83%	31%	39.637.863	33.030.662	16,68%	20%
USA	119.023.495	83.270.389	11,75%	43%	8.281.237	5.632.329	3,48%	47%
Taiwan	24.836.244	20.809.890	2,45%	19%	4.584.860	4.758.384	1,93%	-4%
Portugal	24.002.811	3.714.415	2,37%	546%	1.950.146	353.974	0,82%	451%
Canadá	20.117.997	19.633.771	1,99%	2%	6.974.768	7.680.841	2,93%	-9%
Malaysia	19.648.205	18.417.027	1,94%	7%	1.780.284	1.541.337	0,75%	16%
South Africa	17.569.273	19.863.612	1,73%	-12%	3.903.352	3.819.002	1,64%	2%
Japan	17.159.101	5.412.042	1,69%	217%	3.367.892	803.083	1,42%	319%
SUB-TOTAL	859.941.722	618.196.908	84,86%	39%	213.405.116	163.058.087	89,78%	31%
Other countries	153.392.305	163.969.628	15,14%	-6%	24.280.860	22.123.221	10,22%	10%
TOTAL	1.013.334.027	782.166.536	100%	30%	237.685.976	185.181.308	100%	28%

Fonte: SECEX / Organização: COUROBUSINESS

Table 7 reinforces the previous comments as related to the difference in value between the different types of exported hides, when it presents such hides based on the NCM classification and in quantity measured by weight. This allows confirmation that the value per kilogram of the Wet Blue of highest value, was, during the period, of US$ 2,16; while of Trimmed hide was of US$ 13,17, six times higher. This data also provides the size of the historical loss accumulated by the country, when opting for export of low added value raw material.

 

TABLE 7 - BRAZILIAN LEATHER EXPORTATION BY NCM CLASSIFICATION / January to July 2006
NCM CLASSIFICATION	WEIGHT	PART (%)	US$ FOB	PART (%)	Nº OF HIDES	AVERAGE PRICE
BY LEATHER	BY KILO
Salted/Pickled bovine skins up to 14 kg (ave. 14 kg)	854.773	0,36%	518.288	0,05%	61.055	8,49	0,61
Salted Bovine hides above 14 kg (ave. 25 kg)	1.555.197	0,65%	693.218	0,07%	62.208	11,14	0,45
Bovine Wet Blue hides up to 2.6m (ave. 9 kg)	30.969.900	13,03%	67.024.227	6,61%	3.441.100	19,48	2,16
Bovine Wet Blue hides, incl. Scrappings (ave. 16 kg)	137.202.385	57,72%	274.598.192	27,10%	8.575.149	32,02	2,00
Bovine hide soles (ave. 18 kg)	1.899.445	0,80%	8.220.308	0,81%	105.525	77,90	4,33
Bovine hides,without finishing, incl. Vegetable (ave. 6 kg)	10.937.261	4,60%	117.259.881	11,57%	1.822.877	64,33	10,72
Bovine hides with finishing (ave. 6 kg)	36.996.615	15,57%	487.219.682	48,08%	6.166.103	79,02	13,17
Subtotal - Bovine Hides	220.415.576	92,73%	955.533.796	94,30%	20.234.016	47,22	4,34
Other hides
Horse hides	12.568.692	5,29%	46.162.652	4,56%
Sheep hides	375.831	0,16%	5.268.577	0,52%
Goat hides	161.188	0,07%	1.800.207	0,18%
Pig hides	11.754	0,00%	101.218	0,01%
Reptile hides	3.950	0,00%	95.011	0,01%
Other animal skins	20.737	0,01%	1.088.017	0,11%
Chippings and reconstructed leather	4.128.248	1,74%	3.284.549	0,32%
Subtotal – Other Hides	17.270.400	7,27%	57.800.231	5,70%
TOTAL OF CHAP 41 – HIDES	237.685.976	100,00%	1.013.334.027	100,00%

Below are the tables covering export of Salgado, Wet Blue, Crust and Trimmed hides, prepared by AICSUL.

 

Table 8 – BRAZILIAN LEATHER EXPORTATION BY NCM CLASSIFICATION / January to May 2006
NCM CLASSIFICATION	WEIGHT	PART / (%)	US$ FOB	PART / (%)	Nº OF HIDES	AVERAGE PRICE
BY LEATHER	BY KILO
Salted/Pickled bovine skins up to 14 kg (ave. 14 kg)	452.668	0,26%	284.798	0,04%	32.333	8,81	0,63
Salted Bovine hides above 14 kg (ave. 25 kg)	1.009.917	0,59%	520.041	0,07%	40.397	12,87	0,51
Bovine Wet Blue hides up to 2.6m (ave. 9 kg)	23.841.415	13,89%	50.419.433	7,17%	2.649.046	19,03	2,11
Bovine Wet Blue hides, incl. Scrappings (ave. 16 kg)	99.578.785	58,01%	196.743.324	27,97%	6.223.674	31,61	1,98
Bovine hide soles (ave. 18 kg)	1.268.389	0,74%	5.424.028	0,77%	70.466	76,97	4,28
Bovine hides,without finishing, incl. Vegetable (ave. 6 kg)	7.246.749	4,22%	73.129.144	10,40%	1.207.792	60,55	10,09
Bovine hides with finishing (ave. 6 kg)	25.605.507	14,92%	334.273.051	47,53%	4.267.585	78,33	13,05
Subtotal - Bovine Hides	159.003.430	92,62%	660.793.819	93,95%	14.491.292	45,60	4,16
Other hides
Horse hides	9.433.574	5,50%	34.257.985	4,87%
Sheep hides	290.187	0,17%	3.928.088	0,56%
Goat hides	152.287	0,09%	1.309.491	0,19%
Pig hides	1.550	0,00%	23.768	0,00%
Reptile hides	3.950	0,00%	95.011	0,01%
Other animal skins	10.322	0,01%	598.663	0,09%
Chippings and reconstructed leather	2.770.108	1,61%	2.337.565	0,33%
Subtotal – Other Hides	12.661.978	7,38%	42.550.571	6,05%
TOTAL OF CHAP 41 – HIDES	171.665.408	100,00%	703.344.390	100,00%

 

Table 9 – BRAZILIAN EXPORTATION OF SALTED BOVINE LEATHER
	QUANTITY (Nº OF HIDES)		GROWTH(%)			VALUE (US$)		GROWTH
MONTH	ANO 2006	ANO 2005	VAR06	MONTH	ACCUM.	ANO 2006	ANO 2005	VAR06	MONTH	ACCUM
Jan	8.451	12.841	-41%	-34%	-34%	106.980	328.361	-27%	-67%	-67%
Feb	0.914	10.592	-89%	-91%	-60%	62.751	270.287	-41%	-77%	-72%
Mar	9.743	18.271	966%	-47%	-54%	101.743	555.609	62%	-82%	-76%
Apr	14.478	15.029	49%	-4%	-41%	294.701	351.757	190%	-16%	-62%
May	39.144	12.580	170%	211%	5%	238.664	305.341	-19%	-22%	-56%
Jun	36.128	18.718	-8%	93%	24%	316.363	275.988	33%	15%	-46%
Jul	14.405	24.035	-60%	-40%	10%	90.304	356.490	-71%	-75%	-50%
Aug		27.079					517.378
Sep		33.622					673.968
Oct		33.608					588.799
Nov		60.258					879.583
Dec		14.230					147.157
Total	123.263	280.863				1.211.506	5.250.718

 

TABLE 10 – BRAZILIAN EXPORTATION OF WET BLUE BOVINE HIDES
	QUANTITY (Nº OF HIDES)		GROWTH			VALUE (US$)		GROWTH (%)
MONTH	ANO 2006	ANO 2005	VAR06	MONTH	ACCUM.	ANO 2006	ANO 2005	VAR06	MONTH	ACCUM
Jan	1.664.641	1.028.805	6%	62%	62%	44.890.976	28.846.252	8%	56%	56%
Feb	1.672.005	1.043.598	0%	60%	61%	44.802.970	29.411.472	0%	52%	54%
Mar	2.031.830	1.436.956	22%	41%	53%	55.105.722	39.875.533	23%	38%	48%
Apr	1.731.282	1.252.401	-15%	38%	49%	50.648.981	34.525.642	-8%	47%	47%
May	1.772.962	1.452.135	2%	22%	43%	51.714.108	38.932.316	2%	33%	44%
Jun	1.853.798	1.390.250	5%	33%	41%	54.937.607	39.107.620	6%	40%	43%
Jul	1.289.731	1.190.887	-30%	8%	37%	39.522.055	30.137.870	-28%	31%	42%
Aug		1.563.819					40.532.991
Sep		1.379.856					36.483.350
Oct		1.340.614					33.909.810
Nov		1.357.450					33.585.082
Dec		1.563.715					41.735.077
Total	12.016.249	16.000.486				341.622.419	427.083.015

 

TABLE 11 – BRAZILIAN EXPORTATION OF CRUST AND VEGETABLE
	QUANTITY (Nº OF HIDES)		GROWTH (%)			VALUE (US$)		GROWTH (%)
MONTH	ANO 2006	ANO 2005	VAR06	MONTH	ACCUM.	ANO 2006	ANO 2005	VAR06	MONTH	ACCUM
Jan	255.795	231.087	-31%	11%	11%	15.945.255	15.160.512	-34%	5%	5%
Feb	211.656	279.857	-17%	-24%	-9%	11.688.549	18.487.815	-27%	-37%	-18%
Mar	287.007	240.593	36%	19%	0%	16.255.661	16.822.089	39%	-3%	-13%
Apr	224.461	225.764	-22%	-1%	0%	14.234.811	14.963.452	-12%	-5%	-11%
May	299.339	268.607	33%	11%	3%	20.428.896	18.094.708	44%	13%	-6%
Jun	304.681	279.136	2%	9%	4%	21.376.545	19.293.439	5%	11%	-3%
Jul	345.463	337.773	13%	2%	4%	25.550.472	22.226.116	20%	15%	0%
Aug		398.395					26.541.251
Sep		328.184					21.648.344
Oct		330.514					20.497.582
Nov		342.334					21.523.580
Dec		370.427					24.154.950
Total	1.928.402	3.632.671				125.480.189	239.413.838

 

TABLE 12 – BRAZILIAN EXPORTATION OF FINISHED BOVINE LEATHER
	QUANTITY (Nº HIDES)		GROWTH (%)			VALUE (US $)		GROWTH (%)
MONTH	ANO 2006	ANO 2005	VAR06	MONTH	ACCUM.	ANO 2006	ANO 2005	VAR06	MONTH	ACCUM
Jan	567.261	588.374	-21%	-4%	-4%	45.633.618	47.520.012	-20%	-4%	-4%
Feb	819.336	641.714	44%	28%	13%	63.739.112	47.692.808	40%	34%	15%
Mar	1.012.890	780.123	24%	30%	19%	79.375.047	59.394.238	25%	34%	22%
Apr	864.895	724.527	-15%	19%	19%	67.001.756	56.593.214	-16%	18%	21%
May	1.003.202	715.171	16%	40%	24%	78.523.518	57.481.054	17%	37%	24%
Jun	929.065	719.868	-7%	29%	25%	74.170.144	55.904.586	-6%	33%	26%
Jul	969.453	620.578	4%	56%	29%	78.776.487	48.995.322	6%	61%	30%
Aug		738.633					58.416.335
Sep		713.724					54.654.204
Oct		635.703					49.434.421
Nov		720.832					56.241.976
Dec		713.688					56.708.180
Total	6.166.102	8.312.935				487.219.682	649.036.350

Table 13 shows export of products classified as “Leather goods”. Data shows that in seven months, the quantity exported during 2006 is equal to that of 2005. But in value, it shows an accumulated drop of 3%. In 2005, export through NCM 42050000 reached a total of US$ 108.8 millions, and it is now expected that by the end of 2006, the same amount would at lease be reached. The USA are the main destination with more than 80% of the total.

TABLE 13 - Exportation by NCM 42050000(Leathergoods) / January to June 2006 and 2005 / Values in US$ 1,00
MONTH	IN VALUE		GROWTH			QUANTITY		GROWTH
ANO 2006	ANO 2005	VAR06	MONTH	ACCUM	ANO 2006	ANO 2005	VAR.06	MONTH	ACUM.
Jan	7.068.408	8.352.289	-27%	-15%	-15%	1.573.811	1.847.244	-22%	-15%	-15%
Feb	6.574.583	8.131.028	-7%	-19%	-17%	1.471.272	1.782.420	-7%	-17%	-16%
Mar	10.298.356	9.232.076	57%	12%	-7%	2.234.033	1.947.092	52%	15%	-5%
Apr	7.585.457	7.686.120	-26%	-1%	-6%	1.554.276	1.476.225	-30%	5%	-3%
May	9.642.529	9.444.935	27%	2%	-4%	2.192.978	2.220.118	41%	-1%	-3%
Jun	8.001.480	8.804.410	-17%	-9%	-5%	1.908.333	1.936.775	-13%	-1%	-2%
Jul	8.985.602	8.128.572	12%	11%	-3%	2.181.408	1.853.332	14%	18%	0%
Aug		9.286.181					1.951.748
Sep		9.846.328					2.100.460
Oct		10.075.640					1.987.483
Nov		10.285.090					1.992.106
Dec		9.622.925					2.008.292
Total	58.156.415	108.895.594				13.116.111	23.103.295

Revista Courobusiness - Edição nº 47 – julho/agosto 2006