Seasonal raw hide traders suffer largefinancial losses
FE Team | Published: November 10, 2011 00:00:00 | Updated: February 01, 2018 00:00:00
Jasim Uddin Haroon
A large number of 'seasonal' raw hide traders have suffered substantial financial losses this year as they purchased hides at higher prices, tanners told the FE Tuesday.
They also said the regular hide traders have earned nominal profits during this year's Eid. Many of them had mixed salts with the raw hides amid fast falling of its prices since early hours of Tuesday.
But the tanning firms were cautious in buying raw hides and they expected that they might make profits, owners of leading tanneries told the FE Wednesday.
Tanners said that many middlemen and big merchants have mixed salts at their respective purchasing centres across the country with a view to getting better prices.
"Many seasonal traders
incurred financial losses this year as most of them purchased raw hides at last year's prices which were higher," said Belal Hossain, president of Bangladesh Finished Leather, Leather Goods and Footwear Exporters Association (FLLGFEA).
Mr Belal also said the tanning firms offered lower rates than that of the last year.
The average prices of raw hide and skin this year was Tk 70 per square-foot, according to tanning firms at the city's Hazaribagh area, the major hub of tanneries in the country.
But the prices of higher grades (A-D) were between Tk 75 and Tk 80 per square foot, they added.
Mr Belal said seasonal traders who have bought raw hides at over Tk 1600 a piece of 23-24 square foot incurred financial losses substantially.
Seasonal traders, however, blamed 'unholy alliance' of the tanners for the sharp fall in the prices of the raw hide.
They also blamed tanneries for maximising profits as they did not provide a benchmark prices for hides and skin.
Md Shafi, a seasonal trader at the city's Khilgaon area said: "I have incurred losses of nearly Tk 300,000 this year."
"My average purchase price was Tk 1,700 a piece. But I sold it on an average price of Tk 1550 on Tuesday night," he added.
Shamsul Huda, chairman of Bangladesh Tanners Association (BTA) told the FE that the tanning firms behaved very rationally in procuring raw hides this year.
Mr Huda said: "We offered lower prices this year as we're expecting a financial crisis in the Eurozone where we export,"
He, however, said the regular traders made profit this year. "This (profit) might be between Tk 50 and Tk 70 per piece."
Mr Huda said they would take at least one month to procure all raw hides of nearly 4.0 million slaughtered cattle.
The city dwellers sacrificed animals nearly 5.0 per cent lower than the expectation mainly due to scarcity of cattle in the capital on Sunday, a day before the second biggest religious festival for Muslims, they added.
Tanning plants of Hazaribagh have so far collected 70 per cent raw hides of Dhaka city and around 30 per cent from other parts of the country.
Shakawath Ullah, managing director of Salma Tannery in the city's Hazaribagh area said: "We're yet to get all hides. Big regular traders have preserved those at their respective purchasing centres to get higher prices."
"We want to preserve at least 50 per cent of the annual demand of crust and finished leather," Mr Shakawath who had bought nearly 7000 pieces of raw hides told the FE.
The owners of tanneries who got loans of Tk 3.65 billion from state-owned banks have been proceeding with caution while purchasing raw hides, he added.
The city's 360 tanneries and a few in Chittagong procure over 40 per cent of raw hides during the Eid-ul-Azha.
Md Tipu Sultan of Bengal Leather Complex in the city said the tanneries have been purchasing raw hides on the basis of their financial and marketing strength.
He said he does not see 'abnormal profit' this year for the tanneries. "I don't see a bright future in the next one month as Italy, the leading leather goods making country of the world is in great trouble over its debts."
The cost of converting raw hides into crust leather which local tanneries mainly export to different parts of the globe is Tk 15 per square foot. Local tanneries also produce finished leather as well.
The price of crust leather is now ranging between US$ 1.60 and $1.70 per square foot.
The livestock department said more than 42 per cent hides are available during Eid-ul-Azha, above 10 per cent during Eid-ul-Fitr, 10 per cent during Shab-e-Barat, two per cent during Kali Puja and the rest round the year.
Leather and leather goods had a remarkable export performance fetching $ 353.25 million in 2010-11 financial year -- $ 297.83 million from raw leather and $ 55 million from leather goods, Export Promotion Bureau data show.
UNB adds: Despite global price fall of finished leather and leather-products, tanners think the target of rawhides purchase and collection will be achieved this time.
Fearing massive losses, the tanners did not fix the minimum procurement price of the rawhides, keeping the procurement price open for the first time this year.
"Though we received relatively poor response from the capital, the news that we're getting from different parts of the country is encouraging. We hope our target will be achieved," Bangladesh Tanners' Association President Shahin Ahmed told UNB on Wednesday.
He said they had a target of procuring about 50 lakh pieces of raw hides (cow) and over 30 lakh pieces of goats' skin.
"The rate of sacrificial animals in capital dropped by 20 per cent but in villages the rate rose significantly. Many in capital could not sacrifice animals due to a slump in supply," Ahmed said.
Earlier, tanners feared that the liquidity crisis in the banking sector would hit the raw hide procurement process this time. The tanners sought nearly Tk 600 crore in loan, but the banks could not meet their demand.
Public commercial banks (PCBs) increased the amount of loan this year to help traders purchase raw hides of sacrificial animals.
The four PCBs -- Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank -- sanctioned Tk 3.65 billion loans to facilitate the tanners' rawhide purchase this year compared to last year's Tk 3.0 billion for the same.
Tanners are hopeful that they will receive quality raw hides from different parts of the country this time because of favourable weather condition throughout the country.
They think the quality of raw hide this year will be fine since winter is knocking at the door and there is no possibility of rainfall as predicted by weathermen.
The leather industry's current overall market size is worth around Tk 35 billion a year, industry insiders said.
Our Chittagong Correspondent adds: Sales of cattle hides are yet to get pace amid fears of small traders in realising their investment following price fall in the international market.
Raw hide traders alleged that the tanners did not fix up prices of hides this year that might lead to their financial loss but the tannery owners said the seasonal traders intended to make unusual profit without understanding the market trend.
Traders and wholesalers said they have collected over 0.4 million pieces of cattle hides from different areas of Chittagong, Cox's Bazar, Bandarban and Rangamati districts and are now drying those up in the traditional process.
A warehouse owner at Aturar Depot, the region's prime wholesale market of raw hide in the city, said they are caught in a mess with a good quantity of cattle hides collected from the local market at Tk 70 to Tk 75 per square feet.
"But the tanners are yet to show interest in buying hides. If it is a syndicated attempt then we will definitely lose the money we have invested," said a wholesaler requesting not to be named.
Managing Director of Madina Tannery Abu Mohammed said they will procure raw hides by next week when tanneries will resume production after the Eid vacation.
"There is no syndicate of tanners to artificially bring down prices as claimed by a section of wholesalers. The tanners will buy raw hides to sell leather abroad. So we must procure and sell those after processing at international market price," said Abu Mohammed.
Mr. Abu said all tanneries are closed now and the owners are yet to start procuring cattle hides. They will open by next Sunday and buying will start from Monday or Tuesday when the trend in international market will be understood.
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