Home ›› 20 Jun 2023 ›› Front
Rawhide prices are expected to rise during this Eid-ul-Azha for its surging demand at home followed by complexities in importing processed leather amid a sluggish export of leather and leather goods.
The sector anticipates regaining its golden period from the two years of dullness.
Tanners over the past year are offering favourable prices for regular rawhide even after the government increased prices per square foot of salted rawhide by Tk 7 to Tk 47-52 during last Eid-ul-Azha. So, the seasonal traders expect that there would be better prices for rawhides during this Eid too.
In the previous year, the government’s hiking the price of salted rawhide paved the way for the traders to make a profit as the tanners also paid higher prices, even more than the fixed rates.
But the sudden increase in the prices of salt became a headache for industry stakeholders as it is the main component to process rawhides.
Although the demand for cowhide is increasing in the local industry, the demand for goat hide has significantly decreased for the high processing cost.
Md Shaheen Ahamed, chairman of the Bangladesh Tanners Association (BTA), said that the rawhide price would be determined in collaboration with the commerce ministry. ‘I don’t know what will be the new price, but it will increase,” he said.
Shaheen Ahamed expressed concerns about the recent ‘illogical’ increase in salt prices, which could create obstacles to raising rawhide prices. He also mentioned that the industry is seeking Tk 180 crore in funds to purchase rawhides of sacrificial animals and resolve the land-related issues at Hazaribagh. He also called for halting the realisation of the tanners’ bank dues of Tk 500 crore till the resolution of Hazaribagh land issues.
Md Ashikur Rahman, managing director of Tajin Leather Corporation, explained that despite the unfavourable export performance, rawhide continues to have strong demand at home as importing processed leather has become more challenging due to the ongoing economic crisis. Therefore, the market is expected to flourish during the upcoming Eid-ul Azha.
Profit, expectation and concerns
While the country has rawhide available throughout the year, nearly 50 per cent of the skins are collected during the Eid-ul-Azha season. The majority of rawhide trading takes place through the traders in the Posta area in the capital city, along with a significant number of seasonal brokers during Eid.
During a recent visit to the Posta rawhide trading zone, traders expressed their optimism and mentioned that they had made good profits during the previous Eid, which encouraged them to invest further this year.
Currently, they are purchasing medium-sized (20-25 square foot) cowhides at an average price of Tk 700 per piece, with prices reaching up to Tk 1,000 for high-quality and large-sized (above 25 square foot) ones. It means the wholesalers are buying per square foot rawhide at Tk 30-32 on average.
They said that they need to apply salt worth at least Tk 6-7 per square foot of rawhide for preservation. Besides, another Tk 8-10 is needed for labour costs, transportation, and others.
So the per square foot medium size rawhide price reaches Tk 47-48 and large size at above Tk 50 for tanners to buy.
The traders at Posta said the tanners collect almost half of their yearly demand of rawhide during the Eid-ul Azha as a collection of a large volume of hide reduces their average. That is why tanners also increase the price of salted rawhide in the Eid season than normal period, they added.
Hazi Mohammad Zakir Hossain, the purchase in-charge at Posta-based trading house Mamun and Brothers, said that they were able to generate good profits during the previous Eid as tanners paid them according to the government-fixed rates. Other rawhide traders also reported making profits last year.
Zakir Hossain, however, mentioned that the high price of salt this year, despite record production, will increase the primary preservation costs, resulting in the rawhide price not increasing as expected. He also highlighted that the hot temperature in the country can lead to rapid damage to rawhide quality, which in turn affects the final price. To obtain better prices, seasonal traders should preserve the rawhide before bringing it to them.
Another rawhide trader from Posta, who requested anonymity, noted that there is a significant demand for rawhide in the country, but the high price of salt prevents them from offering better prices. The trader explained that they use an average of 8 kg of salt per rawhide, and the price of a 74 kg bag of salt has increased to Tk 1,350 which was earlier between Tk 1,050 and Tk 1,100. Additionally, labour costs have also risen due to ongoing high inflation, making it challenging to offer competitive prices.
Din Islam Rony, a rawhide trader in Savar Tannery Estate, mentioned that they received good prices from tanners during the previous Eid, which allowed them to make profits after many years. He believes that rawhide prices are likely to increase slightly in the upcoming Qurbani season.
No future for goat rawhide
The demand for goat rawhide has significantly declined due to the increased processing costs, according to tanners and rawhide traders. As a result, large quantities of goat rawhide are discarded in landfills every year.
Zakir of Mamun and Brothers said, “We can sell a salted goat rawhide hardly at Tk 50, but its processing cost amounts to Tk 40 to Tk 45. So, we are not showing interest to purchase goat rawhide.”
Tanners still struggling
Bangladesh considers leather and leather products as emerging export items but the tanners continue to face challenges since 2017 when the government discontinued all facilities for tanneries in Dhaka’s Hazaribagh area and ordered their relocation to the tannery industrial estate in Savar following a High Court order.
However, the relocation process has not seen significant progress even after six years, with solid waste still being dumped in nearby open spaces. Compliance issues and the requirement of LWG certification for exporting leather and leather products to the Western market are yet to be fully addressed.
As a result, the leather sector continues to struggle, and the country is compelled to export major finished leather to China, Vietnam, and Thailand at below-fair prices.
The Bangladesh Small and Cottage Industry Corporation (BSCIC) has so far allocated plots to 154 out of 222 tanneries at the BSCIC Leather Industrial Park at Savar. The BSCIC established a central effluent treatment plant (CETP), but its capacity is insufficient to treat the entire waste generated during the Eid season. This forces tanners to use the CETP judiciously, leading to production stoppages for at least two days a week. Additionally, frequent power outages and low gas pressure further exacerbate the challenges faced by tanners.
Ashikur from Tajin Leather highlighted the significant power cuts and low gas pressure that they experience daily, which has compelled them to halt production during working hours. If these issues persist during the Eid season, it will pose a disaster for the industry.
Unsatisfactory export performance
Bangladesh’s export performance in the leather and leather product sector has been less than satisfactory. According to data from the Export Promotion Bureau (EPB), the country earned $1.12 billion from leather and leather product exports in the first 11 months of FY23, which is only a marginal increase of 0.42 per cent compared to the same period in the previous fiscal year.
Specifically, the data reveals that earnings from processed leather exports during this period amounted to $114 million, reflecting a significant decline of 18.11 per cent compared to the corresponding period in the previous fiscal year. Furthermore, earnings from leather footwear exports also experienced a decline of 4.28 per cent, reaching $644 million in the first 11 months of FY23, as compared to the same period in FY22.
On a more positive note, Bangladesh managed to achieve a year-on-year growth of 19.43 per cent in leather product exports during the first 11 months of FY23, earning $361 million. Despite this growth, it is clear that the overall performance of the leather and leather product sector in terms of exports has been unsatisfactory.
