IMF: World economic growth fastest for more then 30 years
Despite concern about rising oil prices which have now hit US$50/barrel, the IMF has raised its global growth forecast from 4.6% to 5% for 2004, but lowered its forecast for 2005 from 4.4% to 4.3%, citing concern over global oil supplies.
This year major Asian economies are the pacemakers with those of China, India and Japan all expected to grow by 9%, 7.4% (in first quarter) and 4.4% respectively. These first two countries have also increased oil imports to feed manufacturing expansion as their economies are essentially export driven, as if that of Japan. Lower economies of scale and wages, combined with the “globalization process”, are encouraging western companies to contract out the production of finished goods in these emerging economies, with perhaps the best example being the dominance of China in world footwear manufacturing.
China: No change in peg to US dollar seen for yuan
Li Ruogo, deputy governor of China’s Central Bank has dashed any hopes the US may have had of China revaluing the yuan, currently fixed at 8.28 to the dollar, which gives China “unfair trading advantages”. "We have already said time and again that we are moving toward a more market and supply-and-demand based, flexible exchange rate," said Li Ruogu to a group of global bankers gathered for the annual meetings of the International Monetary Fund and World Bank. The US is currently running a record trade deficit with China amounting to some US$125 billion per year and according to Chinese officials, changes will be difficult until structural changes to the banking system are implemented, which could take up to five years. Despite increased crude oil imports of 30% this year compared to 2003 and record crude prices of over US$50/barrel, the Chinese economy is forecast to expand at 9% this year, according to the IMF, and recent moves to slow credit growth to stop the economy overheating appear to have averted an inflationary crisis.
Japan: Optimism of defeating deflation
The fifteen year deflation cycle in Japan may be coming to an end as latest IMF forecasts indicate economic growth at 4.4% in 2004 and 2.3% for 2005. This year’s performance reflects an upturn in consumer confidence and spending which had been stunted for many years as well as optimism that the Koizumi administration will be tackling the non-performing loans still pervading the Japanese banking system earmarked for March 2005. With average wages in Japan over US$35,000 per year and a large consumer-driven middle class, the recovery in retail spending is key to the economy coming out of the long term doldrums. If the banking system is cleaned up in 2005 as was planned back in late 2003, then consumer demand should continue to grow and the IMF’s 2005 forecast could indeed fall short of expectations.
India: Continuing positive results
The 7.4% growth in the April-June quarter exceeded analysts’ expectations by 0.5% and was spurred on by the excellent performance of India’s manufacturing and service sector, which grew at 8%. Overall growth is expected to reach 6% this year but a great deal depends on the agricultural sector which accounts for a quarter of the Indian economy and employs half of India’s one billion strong population. Increased oil imports this year reflect the strength in manufacturing which is the main motor behind the export driven growth of this major emerging economy.
Venezuela: In a bind
Venezuela’s tanning sector is still feeling the hangover of the 2002 - 2003 national economic stoppage and oil industry sabotage. Exchange controls were introduced in January 2003 which effectively made the Venezuelan tanneries uncompetitive compared to their Colombian counterparts, who were operating in the parallel currency market and thus automatically becoming 40%-50% more competitive when buying raw materials in dollars. It was almost impossible for Venezuelan tanneries to buy raw and salted hides from the slaughterhouses since they were operating in local currency and dollars were only available in the parallel market, at a 60% premium. It was even more difficult to export as dollars received had to be redeemed in the Central Bank at the official exchange rate, resulting in a 60% “loss” on the exchange rate. Tannery activity is still low even though there has been an upturn in shoe manufacturing looking to the Christmas buying season. Most footwear, however, is being manufactured from synthetics as such footwear is more accessible for the general public. To complicate matters even more, a drop in consumer demand for red meat, also price controlled, and this combined with government meat imports from Brazil and Argentina to “combat price speculation”, has led to a fall in slaughter and thus less hides are available and consequently more expensive. Some cattle owners are alleged to have illegally exported their animals to neighbouring Colombia to escape government price controls.
The Brazilian shoe industry has managed an 18% increase in billings for exports from January to September this year, compared to the same period 2003. According to preliminary data, this sector earned around US$1,346 million, compared to US$1,145 million in 2003. The Brazilian Shoe Association, Abicalcados, estimates that this year could close with record exports of more than US$ 1,800 million, if the current performance is maintained.
Russia: Increase in agricultural production
The Federal Statistics Service announced that Russia increased its agricultural production by 3.7% to US$ 27.62 million between January and August 2004, compared to the same period last year. Nevertheless, cattle numbers were 25.5 million at the beginning of September, and this figure represents a fall of 6.1%.
European Union: end of export restrictions for Portugal
The EU member countries decided to eliminate the embargo and restrictions on the export of cattle, meat and animal derivatives from Portugal. These measures were introduced at the start of 1998 due to the high incidence of mad cow disease and the inadequate measures taken to control it.
Germany: the tradition behind leather goods
Leather goods exports climbed by 8.8% to 287.4 million euros in the first half of 2004, compared to the first six months of 2003. The main customer was still Europe itself, with Austria, France and Switzerland heading the list of importers. Nevertheless, the US and Japan are only a short distance behind. Leather goods imports to Germany fell from 607 million euros to 605.7 million with China being the main source of these goods.
The Mayor of Offenbach, Gerhard Grandke, named his city as the “International Capital of Leather Culture” in an event commemorating 175 years of the German National Leather Museum.
New Zealand: stability in sheep stocks
Latest data published by the New Zealand Meat and Wool Service have suggested that the number of sheep registered in the Otago and Southland regions will remain the same as last year, when spring storms affected the stock level of these animals. Expectations were high but the extremely cold climate of the last two weeks has made people think that the results will not be as good as expected.
Bangladesh: the leather sector looks for subsidies
Bangladeshi leather exporters have asked the government to grant cash incentives since it is vital to remain competitive in the international market. The Bangladeshi Footwear and Leather Goods Association (BFLLFA) explained that this situation responds in part to the competition from exporters from India and Pakistan, since the latter have received the type of subsidies that they are currently requesting.
The BLC postpones seminar
The BLC Keynote seminar entitled: “A cleaner and greener future for the leather industry” has changed its dates and will take place in June 2005 in a location to be announced in the future. The BLC decided to postpone the event in order to widen the topics included in the programme and in this way be able to capture the interest of other industrial sectors.
Egypt - looking out for the environment
The Egyptian government will receive 521,990 euros from the European Union in order to help with the care of the environment by local tanneries. The money, which comes from a special programme set up by the EU for third world countries, will be handed over to the Egyptian Minister for Industry and Development. The investment will be dedicated mainly to the creation and operations of two pilot plants. According to the European Commission, “the main objective is to show the Egyptian tanneries that it is possible to work using technology that does not harm the environment”.
Italian Union
As of the 1st September, the Italian companies CHIMES and Neochimica Italiana, will merge to form a new company called Letex SpA. The aim of the merger is to rationalize the production process, reduce costs and build a competitive force both in national and international markets. The new company will produce an important range of chemical products for the tanning industry and has an R + D department exclusively set up so as to better these products.
Award for GeMata
The Italian company GeMata, a specialist in tannery machinery has received the 2004 Antonio Pigaffetta Award. The Committee of the Commercial Chamber awarded the company with the gold medal and a certificate for the merit achieved in its commercial activities at international level. The Antonio Pigaffetta Award is awarded annually to companies which have distinguished themselves by penetrating overseas markets and by cooperation in the industrial and international sectors.
Novelties at Louis Vuitton
Nicholas Knightly who formerly worked at Mulberry, is now in charge of leather goods design at the French manufacturer of luxury goods, Louis Vuitton. The company opened a shop in Shanghai on 23rd September this year, adding to those already operating in Xiamen and Xi’an.
Clariant leaves SF-Chem
Clariant sold its shares in SF-Chem, a company based in Switzerland, to the local company Capvis for US$17.5 million as part of a plan aimed at divesting itself of all businesses not related with its core activities. This transformation programme started last year and its main objective is to get out of any non-strategic activity in order to cut costs and achieve a sustained level of competitiveness. Clariant, a world producer of chemicals based in Muttenz near Basle, has representations on five continents, has more than 100 companies and employs 26,500 workers.
Schumacher and Johnson - Stars in sport and business
The German giant Puma AG will be the official footwear supplier of Michael Schumacher, multiple Formula 1 Champion. Jochen Zeitz, president of Puma, stated that after having recently signed a contract with Ferrari, the leading Formula 1 team, they had decided that it was necessary to associate themselves with one of the main reference points in this sport.
Last October 1st, Earvin “Magic” Johnson launched a line of sports shoes, clothing and accessories Magic32. The collection will be produced by BASH Sports and June Bug Enterprises, and will combine fashion and quality at reasonable prices. “Really, I wanted to produce something that the whole family could afford as well as something attractive for kids”, Magic stated. The products will be sold in shops the length and breadth of the United States.
High Point occupies the limelight
The High Point fair attracts the attention of companies from all sectors of the home furniture industry. Businessmen from the US and another 110 countries go in April and October to buy and sell products in a place where new classic designs, styles, concepts and finishes are presented. The next edition of this event which is one of the most important at world level, is from 14th - 20th October at High Point, NC, USA.
Changes at Emerald Home Furnishings and Highland House
Tim Lott has joined the furniture and upholstery manufacturer Emerald House Furnishings as national sales manager. For its part, the upholstery manufacturer Highland House has named Steve Wilson as its national sales manager.
The upholstery manufacturer American Furniture has commenced legal proceedings against the former president of the company, Gerald Washington, since both he and other executives are allegedly violating an agreement signed when the company was sold just a few months ago.
New President at Lifestyle Enterprise
John Wampler has joined the furniture and upholstery importer Lifestyle Enterprise as president of the Forbidden City division. The ex - president of Progressive Furniture will report to the manager James Reddick, and the Chief Operating Officer, Greg Noe.
Le Cuir à Paris brings quality to bear
From 13th - 15th September almost 200 exhibitors from 19 countries showed their designs, colours and materials for the autumn - winter season 2005-2006. Le Cuir à Paris is a fair dedicated to top range materials and aimed at the world of fashion as well as manufacturers of leather and similar materials. This edition of the fair attracted, as is usual, companies, associations and visitors from the length and breadth of Europe. For the first time there was a national pavilion from Brazil. The organizers claimed that satisfaction with the event was generally good and that many exhibitors had confirmed their participation in the two editions planned for 2005.
SPAIN: ILW with a record number of overseas visitors
The 15th edition of the International Leather Week ended with a record number of overseas buyers which amounted to 15.8% of all visitors. From 24th - 26th September, Madrid hosted this fair as well as Modacalzado and Iberpiel Leather Goods, both of which formed part of ILD and which resulted in 23,350 visitors passing through the fair. The three days of Modacalzado covered the trends of the latest and best-known footwear collections.
In Iberpiel Leather Goods there was a wide choice of articles and accessories which incorporated elegance, functionality and avant gard designs. These new designs were complemented by a variety of shapes and colours where vivid tones were combined with more “peaceful” ones.
Special Report:
Magalcuer inaugurated a model industrial plant
FMaglcuer S.A. de Argentina is a family enterprise that exports around 4 million belts and buckles per year. Recently it opened a 30,000 square meter complex in the Parque Industrial Pilar, located at some 40 km from the city of Buenos Aires, where the belt and buckle factories and a leather finishing plant were installed.
Norberto Castellán is founder and president of the company and he explained to Leather Press how this enterprise in unique in global terms.
The company invested approximately US$8 million in the plant where up to a million belts can be manufactured per month, and in the near future there are plans afoot to produce 50,000 bags and 100,00 wallets per month. In April 2003, the plant received the ISO 9001 certification and also operates within the guidelines of IRAM 3800. At present, steps are being taken to obtain the ISO 14001 certification.
The plant installations are characterized by incorporating top line technology with the vertical integration of the manufacturing process, since within this framework the leather finishing and buckle manufacturing processes have been incorporated, which in turn allows the delivery and completion of orders in just 10 days instead of 120, as is the case with most other companies.
“The other advantage of Magalcuer is that fixed costs are absorbed using the same office structure, the same people and the same level of outgoings and experience as before”, pointed out Castellán.
“Magalcuer’s exports began when the first North American client was presented to us. From there, one client recommended us to another and we began step by step. We always act in a clear and transparent way and that helped us”, added Castellán.
“We gradually started to integrate vertically during the years and everything was reinvested in technology and machinery. We made many mistakes and we still make them, but have always persevered. Even though we had a tough time during the years when the Convertibility Law (*) was in force, we still managed to keep exporting and keep a relatively good name overseas”, he added.
Castellán informed Leather Press that Magalcuer has a 4% share of the US belt market and forecasts a 12% share in the next two to three years. “Official data from US organizations indicate that in 2003, the US imported US$ 600 million in leather bags and this figure rises to US$ 1,500 if you include synthetic ones.
Of this total Argentina exported US$ 400,000. There are many possibilities and the market is so large that we cannot possibly cover absolutely everything”, he said.
The production facilities in Magalcuer include areas for the manufacture of buckles with its own designs, a leather finishing unit and a belt production line.
For the beginning of 2005, there are plans to open up a new division for the manufacture of leather goods and they are already working on designs for ladies handbags.
US companies that have already approved and given the green light to Magalcuer include Philips Van Heusen Corp., Kohl’s Department Stores, Liz Clairborne Inc., May Department stores International Inc., Polo, Sean John, Saks Incorporated., Federated and Fossil. The majority of exports go to the US, U.K., Chile, Brazil, Panama, Mexico, Japan, Singapore, Holland, Peru, Italy and Germany and the list of clients that have granted licenses to the company are: Guess, Nautica, Calvin Klein, Tommy Hilfiger, Kenneth Cole, Polo Ralph Lauren, Donna Karen NY, Liz Clairborne and Chaps.
