South AsiaBangladesh

Rawhide traders in Bangladesh hit hard by US-China trade war

Low demand for leather from China has distressed rawhide trading in Bangladesh

August 28, 2018 5:40 PM (UTC+8)
A Bangladeshi trader in Dhaka, left, waits to sell rawhides from animals sacrificed during the Eid-Ul-Adha festival. Photo: Mamunur Rashid

The US-China trade war has hit the price of rawhide that is the basis of Bangladesh’s burgeoning leather industry. Low export orders from China — the largest leather export destination for Bangladesh — and a steep fall in rawhide prices have affected all sections in the trade.

About 60% of the annual demand for rawhide in the country’s leather industry is met by seasonal traders who deal in the business only during Eid-ul-Adha, the second biggest religious festival for Muslims. Currently, they can neither sell their collected animal hides due to very low prices nor preserve them, due to increasing maintenance costs.

Common people have also expressed their anger over the falling price of rawhide. “I would rather dig a hole and bury my rawhide there then to sell it to middlemen at a petty 400 taka ($4.76),” Tajul Islam, a retired engineer from the capital Dhaka, said.

Wholesalers and tanners have been unwilling to buy animal skins from small traders at the standard price. Wholesalers say demand in the international leather market is lower than any previous year owing to the China-US trade war. Delay in establishing effluent treatment plants in the Savar, the leather industrial center on the outskirts of Dhaka, has also delivered a blow to large export orders, they said.

Decreasing price of rawhide

Seasonal traders, who have different occupations for the rest of the year, have been hit badly by the downturn. They visit people’s homes to buy the rawhide, skinned from sacrificial animals, during the festive season. Then they sell the rawhide to leather wholesalers and tannery owners. Middlemen help collect skins from over 8-9 million cattle, goats and sheep sacrificed during Eid each year in a country with a population that is over 90% Muslim.

Tajul Islam said 20 years ago he sold the rawhide of his sacrificial animal for 600 taka ($7.14) after buying the cow for 15,000 taka ($178.80). “Now, I bought my cow for 72,000 taka ($858.14) but was offered 400 taka ($4.16) for its skin! It’s a joke,” he said.

“I now have to pay Tk 3,500 ($41.66) for a pair of decent leather shoes whereas the price of the same was not more than Tk 600 ($7.14) twenty years ago. How do you explain these changes in prices?” he asked.

Asia Times found that the price of rawhide has been falling for the last few years as wholesalers and tanners have formed a syndicate to control prices. The large traders say they fix the rate to avoid losses. However, statistics from Bangladesh’s Export Promotion Bureau indicate that exports of leather products have increased threefold over the last four to five years except for the last fiscal year, which saw a drop.

Before Eid, leather wholesalers and tanners, in association with Ministry of Commerce in Bangladesh had fixed the rate of rawhide at Tk 45-50 (53 to 59 US cents) per square foot in Dhaka and at Tk 35-40 (41 to 47 cents) outside the capital, which is the lowest in the world.

Preservation is another issue for the seasonal traders. If wholesalers and tanners do not buy the rawhide at the usual time, these small businessmen are bound to spend more money preserving the skins.

Rashed Jitu, a seasonal trader of rawhide from the capital’s Lalbagh area, said he had collected over 1,200 pieces but couldn’t sell half of it as wholesalers were reluctant to buy. That meant he has to spend to preserve the skins.

Less export orders from China

Wholesalers and tannery owners said despite the low prices that the middlemen and seasonal businessmen were offering, they felt reluctant to buy rawhides because they haven’t received new export orders over the past few months.

Sakhawat Ullah, general secretary of the Bangladesh Tanners Association, said exports to China over the last three months were close to zero. “They are not even taking 100 containers of pre-ordered processed leather,” he said.

Ullah said tanners could only export crust leather (processed rawhide) to China, as the country doesn’t take rawhide. “In the last fiscal year of 2017-18, Bangladesh exported 150 million square feet of crust leather to China, amounting to over 50% of the [country’s] total crust leather export,” Ullah said while referring to BTA data.

“We sold per square feet of crust leather to China at Tk 100 ($1.20). Now after the USA-China trade war started this year, the Chinese buyers are not offering us more than Tk 80 ($0.95). At this price, it is not possible for us to sell,” Ullah said. “The Chinese buyers are saying that now they need to pay an extra 25% tariff for the US market, they have no option but to pay us less price for our leathers.”

China takes crust leather from Bangladesh and produces high-end finished leather products. And the US is one of China’s largest export destinations for these products.

Other factors

Shahin Ahmed, president of the Tanners Association, said that on top of the China-US trade war, demand for leather products had slumped because alternatives to leather had been invented around the world.

Bangladesh’s export earnings from leather suffered a big drop – over 12% – in the 2017-18 fiscal year. Manufacturers blamed the forced relocation of the country’s tanning industry from Hazaribagh in the capital to Savar, an industrial town outside of Dhaka.

Ahmed said transferring the tanneries from Hazaribagh in Dhaka to Savar caused “around 225 tanneries” to close down.

The leather sector, the second largest export earner after apparel products, contributed $1.08 billion to the total national exports of $36.7 billion in the 2017-18 fiscal year.

According to Export Promotion Bureau data, Bangladesh earned $1.23 billion from the sector in the 2016-17 fiscal year. The strong performance had even prompted Prime Minister Sheikh Hasina to announce leather as the Product of the Year for 2017, saying the government would “boost this industry to reach its full potential”.

However, this year has been an unhappy one for the industry.

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