From the Terraces
This is being written from the Terrace on the 18th floor of Broadway Mansions, a famous Shanghai residence since 1934, and now a modern hotel overlooking the famous Bund. It is actually the best way to see the Bund right now as the road, the riverside walkway and nearly all the major buildings are being refurbished for next year’s World Expo. Half a dozen new subway lines are being built and new underground water mains are being put in. Frankly, nearly all of Shanghai is a building site right now.
We have just seen the end of the Shanghai Leather Fair (ACLE) which this year has been more significant than ever. It has been the first time that the industry can meet collectively to examine whether the apparent recovery is real or not. It is actually astonishing to think that just a year ago at this show and even in Bologna a little later the industry thought it would escape the worst of any a recession and then suddenly we had Lehman and an unprecedented crash. The consensus is that the improvement will be sustainable but that speculators have pushed US rawhide prices too high over the summer. The car industry has restarted and in China actually never declined, the footwear business is steady if not spectacular and in the luxury sector it is top quality leather goods that have been keeping the brands alive. The clothing sector is weak but should get help from current fashion swings. Overall it is the high spending Chinese consumer who is providing the foundation while consumers in the west save a bit more and rebuild lost wealth. What was clear was that everyone we met in Shanghai was pleased with the outcome of the Fair.
Not least was alumnus Jonathan Muirhead who turned up in his kilt to host a big party to celebrate the launch of ZIBOW (Zibo Polygrace Bridge of Weir Leather Company Ltd. This is their JV to make leather primarily for Volvo in China. Smaller Volvos like the C30 is only offered in leather in China (20% leather in Europe) so an auto market growing at 40% per annum is a fun place to be for tanners. Even the VW Passat has leather as standard in China with leather as an option for cheaper models.
Consolidation a foot
There are clearly going to be some changes in the industry as a result of the recession. In general the word “consolidation” is the one being most used and this is the one that the chemical industry has enjoyed fiddling with over the last fifteen years or so, and seems ready to indulge again. What a leather chemicals company should look like for the future is a fun question to toy with, but serious for those involved. On the leather side the big changes are the reaction of the raw hide people in meat packers and abattoirs being caught out by no demand for hides and limited salting capabilities. To give themselves more flexibility and power in the chain many are now adding to wet blue capacity or getting into wet blue. This is happening in both the US and Brazil. With Europe suffering and other changes in Asia afoot we need to watch the leather industry with care; the buzz phrase related to consolidation is vertical integration so this gives an indication of what people are thinking.
As the BSLT rebuild continues at home (the lobby and lecture rooms are currently being fully refurbished) Dr. Wilkinson found new opportunities with both sectors and key accounts at ACLE helped by the fact that alumni are now in many senior positions. Think of Richard Pai from TehChang and both Mike Todd and David O’Leary at Coach. Many more alumni who are not fully registered with the alumni association or the Corium Club keep being uncovered and all are pleased to be found so hopefully 2010 will see the records truly put to right. Our trial at using Face Book to gather Corium members in Shanghai failed as we had forgotten that Face Book is banned in China. So for the week we had no access to either Face Book or Twitter. Rather foolish not to have realised it.
September 7, 2009