Leather shipment recovers, fetches $100 million in 9 months

The shipment of leather has started to revive as Bangladesh fetched $100.40 million from the sales of the semi-finished raw materials in July-March of 2023-24, data from the Export Promotion Bureau (EPB) showed.

The exports were up 9.8 percent from the identical period a year prior.

A spike in the import of semi-finished leather by China is helping local suppliers export a higher volume of the product.

According to industry insiders and exporters, China has started to import a significant quantity of semi-finished leather from Bangladesh to remain competitive in the US market by the way of keeping the production cost lower.

"Export orders for semi-finished leather from China have increased substantially in the last three to four months," Diponkar Tripura, owner of Life & Race Bangladesh, a manufacturer and exporter of leather and leather goods.

The dragging trade row between Washington and Beijing has brought about a positive impact on leather exports from Bangladesh. Besides, the production cost in China has gone up in the last few years driven by a surge in labour wages, prompting manufacturers in the world's second-biggest economy to source raw materials from the South Asian nation.

Chinese companies import semi-finished leather from Bangladesh and process them in China before manufacturing finished products in Vietnam and Cambodia for the US markets, said Tripura.

If Chinese firms export products from China, the US importers will have to pay an elevated level of tariffs, which are comparatively higher than Vietnam and Cambodia, he said. "Therefore, they are importing raw materials from Bangladesh."

Besides, Chinese companies use imported raw materials to meet the demand for their domestic leather goods market, which was valued at $22 billion in 2022.

Bangladesh has 161 tanneries that process rawhides into finished leather. However, 98 percent of them are not compliant as per global standards, forcing local suppliers to sell semi-finished leather, said Tripura.

Arifur Rahman Chowdhury, general manager of ABC Footwear Industries Limited, said China is phasing out industries hazardous to the environment such as the initial processing of rawhides. "So, they import semi-finished leather from Bangladesh."

However, he said, the price of semi-finished leather is low in Bangladesh, making the country a lucrative sourcing destination for Chinese importers.

Although the exports of semi-finished leather are gaining pace and generating foreign currencies for the country, Bangladesh is, in reality, losing out since it could have earned more had it been able to export finished leather and finished goods produced from the local leather directly.

For that to happen, local processors will have to secure certification from the Leather Working Group (LWG), a global multi-stakeholder community committed to building a sustainable future with responsible leather.

A top official of a leather product exporter says the Bangladeshi firms that process world-class finished leather don't sell them in the local market since they don't receive cash incentives from the government.

The government provides a 12 percent cash incentive on the shipment receipts of semi-finished leather. Of the semi-finished leather produced in Bangladesh, 70 percent is exported, mainly to China.

The official says there is a scope to add value to the products sold abroad and then export them directly. Direct exports can earn as high as $5 billion for Bangladesh, he said.

A senior official of the Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) said the global economy has begun recovering, which will raise the demand for luxury products like leather items.

"As a result, the orders for leather from Bangladesh will grow in the coming months and we will receive better prices as well."

Finished leather exports fetch less than one-third of footwear: one square foot of leather fetches only $0.60, according to the LFMEAB .

Bangladesh would have received at least $1.5 per square foot if the central effluent treatment plant in the tannery estate in Savar could treat all of the toxic chemicals released, said MA Awal, vice-chairman of the Bangladesh Finished Leather, Leathergoods and Footwear Exporters' Association.

Bangladesh produces 400 million square feet of leather annually, according to industry people. There are 165 footwear and leather factories in the country.