Publisher of leading trade magazines for the Footwear, Leather-goods, Leather & PPE industries

PLEASE NOTE: We are currently busy with the rollout of the new website so there are elements that are currently still being tweaked and content being added.

Automotive: Move away from SA continues, and local hide prices must come down

Published: 31st May 2017
Author: From Adrian Visser; finance & administration director; Seton AutoLeather

Adrian Visser

We could re-print the same report that was written last year as all those factors, trends and predictions held true for this past year as well, and will probably continue to do so going forward.
The sourcing of business to Europe, the de-contenting and the swing away from leather interiors have continued this past year, resulting in a much lower order book than in previous years. The cutting for several programmes has also been moved to Europe, with another big one to follow in early 2018. The tanners were fortunate that we could continue supplying the hides, but this whole hide supply has its own challenges, with high reject costs in whole hide form with not outlet to cut these hides in-house to salvage some of the value in the hides.
The big news this past year was the sourcing of the 3-Series and its derivatives to 2 European tanneries. The bread-and-butter of the SA automotive leather industry will be lost to us by 2019, resulting in an expected drop in volumes by as much as 40%. It is the first generation of 3-Series vehicles not to be sourced from RSA since its launch a few decades ago. This will have far-reaching implications for the remaining 2 automotive tanneries in terms of volumes and employment.
The result of these expected lower volumes will ultimately mean an increased drive for subsidiary business, in other words the supply of hides on an inter-company basis. Both tanneries have seen a big increase in this type of business.
The future of this additional business is dependent on the availability of good quality South African raw material and reasonable raw material prices. These have remained stable over the past year. However, with the strength of the ZAR, as well as the current global market conditions, there is a dire need for these to come down. If they don’t, this subsidiary business can be sourced or manufactured more cost effectively elsewhere.
For the local tanners, the point has been reached where importing hides is a cheaper option than sourcing locally. This naturally goes against everything that the government and this industry is trying to achieve.
 
This report was presented at the Skin, Hide & Leather Council (SHALC) AGM, at the Intercontinental Hotel, OR Tambo Airport, May 26

Related Articles

 

©2017 S&V Publications
Untitled Document