WHY ARE LEATHER PRICES RISING
COW HIDES HIT HISTORICAL HIGH PRICES THIS WEEK
Written By Vice President, Scott Gelander
As a global hide trader with a career in the upholstery leather business, customers and tanners often call to ask me, “Why are leather prices rising every week?” There is one main reason. China!
China’s middle class represents over 300 million people, vastly outnumbering the entire population of the United States. All of 2003 China’s auto sales for new vehicles were 1.8 million. In January of 2014 China sold 2.16 million cars in just one month! This puts them on track for some 25 million cars this year. They have surpassed the US by nearly 10 million more vehicles sold.
You may be asking, “What’s this have to do with leather?” The answer is: everything. Above average auto sales means more cowhides are needed to produce leather interiors. The top raw material for automotive leather is American cowhides. Now, millions of cars are being produced, which requires millions of hides.
The automotive industry consumption is a major factor contributing to demand for cowhides exceeding the supply. The new Chinese middle class prefers leather handbags, jackets, shoes, boots, briefcases, belts, wallets, and furniture. The luxury brands like Louis Vuitton line the streets of China’s major cities like McDonalds in the US. Retail is booming.
The combination of autos, personal leather goods, and leather furniture demands make China the leather buying capitol of the world. Last year hide prices were 20% over the previous year. Today prices for the best selections are up another 10%. As a major hide packer told me last week, “I have been in this business 30 years and never seen anything like what has happened the past few years, especially the past few weeks.”
Even at historic high prices, would you be surprised to know that most US hide sellers are completely sold out through March?
To many, leather represents luxury and sophistication. The world is getting a lot more luxurious and sophisticated. Therefore, expenses rise, and now you know why.