Surprising export through September
US$ 1,344 billion; 26.4 millions units
41% of high added value; 59% of low added value

Export of hide continues as a surprise for 2006. Final export data covering January through September 2006 of chapter 41 of NCM, has presented a growth of 29% in value and 24% in quantity, when compared to the same period of 2005, as per table 5. When the analysis is restricted to the export of bovine hides – see table 1 – the growth in value is of 30% and 27% in quantity. Missing only the export of the fourth quarter of 2006, the expectation is that the export in value at the end of 2006 will reach an approximate amount of US$ 1,8 billion, a historic record.

Through the end of September, approximately 26.400.000 bovine hides left the country. From this total, we can say that 41% in high added value hide and 59% of lox added value hide, basically in the Wet Blue stage. The proportion between the export with and without added value bothers the analysts. The current relation - for each exported added value hide, 1,43 hides without added value is exported - is seen as a waste by some entities and as a threat by others.

The waste can be measured in value. If the relation would be inverted, only during the first nine months of 2006, the country would have accounted more than US$ 250 millions in its benefit, this means, the lack of pro-export mechanisms and instruments, in majority in the highest added value, results in a significant financial loss.

The threat would go beyond the hide segment and would reach the relations of the several links of the productive chain - mainly footwear - specifically in the trading activity as the international market.

Tables 1 through 4 indicate a significant growth in export of hide - with specific highlight for those of the bovine origin – 27% in quantity and 30,7% in value - which is in contrast with the reality not always positive of preponderance in the export of a product which value is US$ 29 in detriment of other having a value of US$ 80 a unit. Export occurs in this case, without restrictions, based on the free game of the market trends The sole restriction which is present – a tax of 7% in 2006 and 4% in 2007 is applied on the Wet blue hide -, does not result, in theory in direct effect in export of added value, although some believe that the initial application of tax (9% in 2001) has resulted in the installation of new Trimmed hide plants, which would bring their participation, to a total of one third.

When considering the reality of the preponderance of the Wet Blue hide, of extremely low added value and if compared with the destination it has, the analysis deviates towards the side of the structural threat of the footwear-leather chain. Table VI imposes the reality of the preponderance of the destination China plus Hong Kong. 44,5% of the Brazilian hide, basically in the Wet blue stage is exported for those regions. Brazil would be transforming itself in a hostage of the Chinese market, with twice as much perverse effect, this means, they would buy the low added value raw material and would transform it into footwear equally of low added value and which is exported to the United States, progressively taking over the Brazilian marketplace in the United States. An estimated loss of more than 40 million pairs which should have been sold to the United States. The hide that is exported to Italy also competes at the point of the productive chain with the differential that the dispute is occurring in the highest added value footwear where Brazil has no tradition as yet. Loosing market share of low added value is a threat that is not considered for the future as it is already happening now

Another phenomenon that is produced due to the China factor, is that not only leather is being exported to that country but also technicians that, under normal situation, would be working here. Complete organizations are also leaving. And these complete organizations will become new threats in the future as they will wish to bring into Brazil a production made in China and for this reason will be fighting for the reduction in import duties. Supplying the Chinese industry (whether Chinese or Brazilian property) of low cost hide, Brazil is becoming a potential suicide when the subject is the footwear-leather chain. This affirmation has nothing to do with the free market, this means, what is behind it is the governmental inertia, the passive acceptance that nothing can be done to defy the Chinese in the footwear segment (as well as in textiles) and that we should conform ourselves in having an insignificant role when comparing forces. Even respecting the free market, without imposing restrictions, Brazil should adopt procedures that stimulate the reversal of the scenario, as there is no businessman that would not like to sell at US$ 29 what could be sold at US$ 80. If the central government does not wish to adopt a policy directed to stimulation of added value hide export, then it should not apply any type of restriction - such as for example application of a tax - which main objective is to obtain approximately US$ 35 millions per year from the private sector without any qualitative counterpart.

The debates within the tanning industry, as can be seen in another article of this edition, have shown that there are two streams. One that defends not only the application of a tax on export of Wet Blue, but that is should be applied at a real inhibiting level, well above the current 7%, even up to the double of this percentage. The other stream does not accept the tax, as this tax is seen as an unnecessary transfer of resources from the private sector to the public sector. It also criticizes, and with good reason, the lack of governmental programs and projects directed to the transformation of the Wet blue exporter into exporter of higher added value hide. This stream believes that the majority of the current Trimmed hide exporters has already started export of Wet Blue hide, which in this meaning, has achieved the role of "business card" for the Brazilian hide, breaking preconceptions and natural inhibitions of those that were not exporting in the past.

The final balance reveals that export of hides is progressively growing, generating an expectation to reach the amount of US$ 2 billions by the end of 2007, an unimaginable amount a few years ago. The national tanning industry adequately supplies the internal market and there is no other mean other than to export the excess, but, the government as well as the corporations should make an additional effort to qualify the Brazilian export. This is not what is happing at this moment. Contribution of the hide export to the Brazilian balance of trade has been growing progressively in importance, lacking only the quality jump that the industry has proven to be capable to face. Thus, the governmental stimulation is fundamental, as its absence in the debate only favors the non-committed export, the one that, even if legitimate, has an immediatist vision that can provide satisfactory results at present, but for sure will generate negative effects in the future and characterize definitely the country as a mere supplier of low added value raw material..

This was not the vision of CICB and of the businessmen of the segment a decade ago, but the lack of debate and of interest of the organizations have resulted in what we are seeing now. Profits at short term are growing, but future is uncertain.

 

Table 1 – Leather Exporation / By Nº of Hides January to September – 2006 x 2005
Kind of leather	Jan/Sep 2006	Jan/Sep 2005	2006/2005 (%)
Salted	166.147	172.766	-3,83%
Wet Blue	15.411.824	11.738.705	31,29%
Crust	2.601.750	2.589.396	0,48%
Finished	8.220.389	6.242.710	31,68%
Sub-Total	26.400.110	20.743.577	27,27%
Soles	136.245	94.135	44,73%
Sheep	443.741	340.045	30,49%
Goats	240.597	637.377	-62,25%
Total Geral	27.220.693	21.815.134	24,78%

Source: SECEX

Organization: Courobusiness

Table 2 – Leather Exportation/ By Value – US$ 1.00 January to September – 2006 x 2005
Kind of leather	Jan/Sep 2006	Jan/Sep 2005	2006/2005 (%)
Salted	1.680.131	3.635.179	-53,78%
Wet-Blue	447.496.097	317.853.046	40,79%
Crust	175.423.804	173.237.726	1,26%
Finished	658.679.939	486.651.773	35,35%
Sub-Total	1.283.279.425	981.377.724	30,76%
Soles	10.949.836	7.184.566	52,41%
Sheep	6.645.176	5.308.727	25,17%
Goats	2.183.726	2.506.445	-12,88%
Total Geral	1.303.058.163	996.377.462	30,78%

Source: SECEX

Organization: Courobusiness

Table 3 - Leather Exportation / Average exporting value January to September – 2006 x 2005
Kind of leather	Jan/Sep 2006	Jan/Sep 2005	2006/2005 (%)
Salted	10,11	21,04	-51,94%
Wet-Blue	29,04	27,08	7,23%
Crust	67,43	66,90	0,78%
Finished	80,13	77,96	2,79%
Sub-Total	48,61	47,31	2,75%
Soles	80,37	76,32	5,30%
Sheep	14,98	15,61	-4,08%
Goats	9,08	3,93	130,81%
Total Geral	47,87	45,67	4,81%

Source: SECEX

Organization: Courobusiness

Table 4 - % participation in quantity exported January to September (2006 and 2005)
Kind of leather	Jan/Sep 2006	Jan/Sep 2005
Salted	0,63%	0,83%
Wet Blue	58,38%	56,59%
Crust	9,86%	12,48%
Finished	31,14%	30,09%
Total Geral	100,00%	100,00%

Source: SECEX

Organization: Courobusiness

Table 5 - BRAZILIAN EXPORTS OF HIDES AND SKINS (CHAP 41) – Jan/Sep 2006/05
VALUE (US$)			GROWTH (%)			QUANTITY (KG)		GROWTH (%)
MONTH	ANO 2006	ANO 2005	VAR06	MÊS	ACUM.	ANO 2006	ANO 2005	VAR06	MÊS MONTH	ACUM.
Jan	112.481.705	97.449.804	-15%	15%	15%	30.483.749	22.644.786	-6%	35%	35%
Fev / 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%
Abr / Apr	140.157.676	113.099.501	-13%	24%	25%	33.111.749	26.087.296	-17%	27%	33%
Mai / 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%
Ago / Aug	173.272.600	135.312.293	15%	28%	29%	37.063.201	32.577.877	27%	14%	26%
Set / Sep	158.289.472	121.855.923	-9%	30%	29%	32.873.411	29.604.619	-11%	11%	24%
Out / Oct		110.926.696					27.746.306
Nov		118.918.700					29.488.381
Dez / Dec		131.948.845					32.259.912
Total	1.344.896.099	1.401.128.993				307.622.588	336.858.403

Source: AICSUL

 

Table 6 - DESTINATION OF HIDES AND SKINS EXPORTS BY COUNTRIES (CHAP 41) 2005/06 - BRASIL
COUNTRIES	VALUE (US$)		PERCENTAGE		QUANTITY (Kg)		PERCENTAGE
Jan/Sep 06	Jan/Sep 05	PART06	05/06 GROWTH	Jan/Sep 06	Jan/Sep 05	PART06	05/06 GROWTH
Italy	351.659.070	244.133.207	26,15%	44%	96.791.277	68.142.881	31,46%	42%
Hong Kong	258.560.336	185.499.463	19,23%	39%	86.348.958	74.070.467	28,07%	17%
China	208.827.030	169.670.269	15,53%	23%	50.651.676	43.017.304	16,47%	18%
USA	154.877.612	116.483.619	11,52%	33%	10.716.813	8.513.057	3,48%	26%
Taiwan	32.582.123	28.851.050	2,42%	13%	5.572.734	6.755.941	1,81%	-18%
Portugal	29.972.343	4.933.047	2,23%	508%	2.433.913	465.325	0,79%	423%
Canadá	24.944.919	24.128.276	1,85%	3%	8.490.446	9.228.749	2,76%	-8%
Malaysia	24.246.225	24.744.371	1,80%	-2%	5.204.191	4.877.662	1,69%	7%
South Africa	23.605.792	23.366.727	1,76%	1%	2.138.495	2.007.617	0,70%	7%
Japan	23.410.408	7.445.329	1,74%	214%	5.734.656	1.081.435	1,86%	430%
SUB-TOTAL	1.132.685.858	829.255.358	84,22%	37%	274.083.159	218.160.438	89,10%	26%
Other countries	212.210.241	210.079.394	15,78%	1%	33.539.429	29.203.366	10,90%	15%
TOTAL	1.344.896.099	1.039.334.752	100%	29%	307.622.588	247.363.804	100%	24%

Source: AICSUL

Table 7 - BRAZILIAN LEATHER EXPORTATION BY NCM CLASSIFICATION January to September 2006
NCM CLASSIFICATION	(KG) WEIGHT	PART (%)	US$ FOB	PART (%)	Nº OF HIDES	AVERAGE PRICE
BY LEATHER	BY KILO
1. Salted/Pickled bovine skins up to 14 kg (ave. 14 kg)	1.137.198	0,37%	773.745	0,06%	81.228	9,53	0,68
2. Salted Bovine hides above 14 kg (ave. 25 kg)	2.122.957	0,69%	906.386	0,07%	84.918	10,67	0,43
3. Bovine Wet Blue hides up to 2.6m (ave. 9 kg)	35.984.116	11,70%	79.349.699	5,90%	3.998.235	19,85	2,21
4. Bovine Wet Blue hides, incl. Scrappings (ave. 16 kg)	182.617.422	59,36%	368.146.398	27,37%	11.413.589	32,26	2,02
5. Bovine hide soles (ave. 18 kg)	2.452.405	0,80%	10.949.836	0,81%	136.245	80,37	4,46
6. Bovine hides,without finishing, incl. Vegetable (ave. 6 kg)	14.793.029	4,81%	164.473.968	12,23%	2.465.505	66,71	11,12
7. Bovine hides with finishing (ave. 6 kg)	49.322.333	16,03%	658.679.939	48,98%	8.220.389	80,13	13,35
Subtotal - Bovine Hides	288.429.460	93,76%	1.283.279.971	95,42%	26.400.109	48,61	4,45
Other hides
Horse hides	12.694.008	4,13%	46.639.814	3,47%
Sheep hides	443.741	0,14%	6.645.176	0,49%
Goat hides	240.597	0,08%	2.183.726	0,16%
Pig hides	14.066	0,00%	119.987	0,01%
Reptile hides	3.950	0,00%	95.011	0,01%
Other animal skins	28.830	0,01%	1.610.695	0,12%
Chippings and reconstructed leather	5.767.936	1,88%	4.321.719	0,32%
Subtotal – Other Hides	19.193.128	6,24%	61.616.128	4,58%
TOTAL OF CHAP 41 - HIDES	307.622.588	100,00%	1.344.896.099	100,00%

Source: AICSUL

Revista Courobusiness – Ed. 48 – Set/Out 2006