Tannery Industry

March 2018

Leather | Production Process

Major Producing Countries | Raw Hides amp Skin and

Leather

4

1816 15 14

China Brazil Italy Russia India

Billion Sq ft

FY16

China is the most leather producing country as it produces every type of leather ie Heavy

Light from Bovine Light from goat and sheep

Brazilrsquos leather is best in the world and majority of itrsquos production comprises light leather

from bovine

Italy is the top leather producing country in Europe with the use of leather in the country

popular for shoes cars and sporting goods

India with its fast growing pace in this sector will soon surpass Russia as it has the largest

livestock holding country - 21 large animals and 11 small animals

Top Importing countries | Raw Hides amp

Skin and Leather

58

3318 16 12

215

124

69

6043

0

5

10

15

20

25

China Italy Hong Kong Vietnam Mexico

FY16

Billion US$ Share

In FY16 the total leather imports were $26 billion

China being the largest leather market for couple of years is the highest importer of Raw Hides

amp Skin

In FY16 Total

Raw hides amp skin

and leather

imports - $268

billion

Top Exporting Countries | Raw Hides amp Skin and

Leather

43

27

2

16

11

164

103

77

61

42

00

20

40

60

80

100

120

140

160

180

Italy USA Brazil HongKong Germany

0

05

1

15

2

25

3

35

4

45

5

FY16

Billion US$ Share

Italyrsquos leather is among the best globally and being the 3rd largest leather producing country has

the most exports

Brazil being the second largest producer of leather exports in FY16 were majorly supported by

the growth in bovine leather

Hong Kong exports are majorly backed by imports

In FY16 Total

Raw hides amp skin

and leather

exports - $263

billion

Local Industry | Introduction

Tanning industry is an export oriented industry of Pakistan The industry

comprises of 6 sub-sectors such as tanning leather garments leather gloves

leather footwear leather shoe uppers and leather goods

During 1950s well equipped tanneries were set up in Karachi and Lahore while

during 60s and 70s more units were established in Hyderabad Kasur Sialkot

Multan Sahiwal and Gujranwala

Tanning industry stands the second largest after textile in contributing to the

total foreign exchange earnings of the country ie 5 In FY16 Leather exports

were $098 billion and total exports of Pakistan stood at $208 billion

Pakistan Tannery industry has an estimated production capacity of 90 million

sq meters and its actual production is around 60 million sq meters

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Leather | Production Process

Major Producing Countries | Raw Hides amp Skin and

Leather

4

1816 15 14

China Brazil Italy Russia India

Billion Sq ft

FY16

China is the most leather producing country as it produces every type of leather ie Heavy

Light from Bovine Light from goat and sheep

Brazilrsquos leather is best in the world and majority of itrsquos production comprises light leather

from bovine

Italy is the top leather producing country in Europe with the use of leather in the country

popular for shoes cars and sporting goods

India with its fast growing pace in this sector will soon surpass Russia as it has the largest

livestock holding country - 21 large animals and 11 small animals

Top Importing countries | Raw Hides amp

Skin and Leather

58

3318 16 12

215

124

69

6043

0

5

10

15

20

25

China Italy Hong Kong Vietnam Mexico

FY16

Billion US$ Share

In FY16 the total leather imports were $26 billion

China being the largest leather market for couple of years is the highest importer of Raw Hides

amp Skin

In FY16 Total

Raw hides amp skin

and leather

imports - $268

billion

Top Exporting Countries | Raw Hides amp Skin and

Leather

43

27

2

16

11

164

103

77

61

42

00

20

40

60

80

100

120

140

160

180

Italy USA Brazil HongKong Germany

0

05

1

15

2

25

3

35

4

45

5

FY16

Billion US$ Share

Italyrsquos leather is among the best globally and being the 3rd largest leather producing country has

the most exports

Brazil being the second largest producer of leather exports in FY16 were majorly supported by

the growth in bovine leather

Hong Kong exports are majorly backed by imports

In FY16 Total

Raw hides amp skin

and leather

exports - $263

billion

Local Industry | Introduction

Tanning industry is an export oriented industry of Pakistan The industry

comprises of 6 sub-sectors such as tanning leather garments leather gloves

leather footwear leather shoe uppers and leather goods

During 1950s well equipped tanneries were set up in Karachi and Lahore while

during 60s and 70s more units were established in Hyderabad Kasur Sialkot

Multan Sahiwal and Gujranwala

Tanning industry stands the second largest after textile in contributing to the

total foreign exchange earnings of the country ie 5 In FY16 Leather exports

were $098 billion and total exports of Pakistan stood at $208 billion

Pakistan Tannery industry has an estimated production capacity of 90 million

sq meters and its actual production is around 60 million sq meters

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Major Producing Countries | Raw Hides amp Skin and

Leather

4

1816 15 14

China Brazil Italy Russia India

Billion Sq ft

FY16

China is the most leather producing country as it produces every type of leather ie Heavy

Light from Bovine Light from goat and sheep

Brazilrsquos leather is best in the world and majority of itrsquos production comprises light leather

from bovine

Italy is the top leather producing country in Europe with the use of leather in the country

popular for shoes cars and sporting goods

India with its fast growing pace in this sector will soon surpass Russia as it has the largest

livestock holding country - 21 large animals and 11 small animals

Top Importing countries | Raw Hides amp

Skin and Leather

58

3318 16 12

215

124

69

6043

0

5

10

15

20

25

China Italy Hong Kong Vietnam Mexico

FY16

Billion US$ Share

In FY16 the total leather imports were $26 billion

China being the largest leather market for couple of years is the highest importer of Raw Hides

amp Skin

In FY16 Total

Raw hides amp skin

and leather

imports - $268

billion

Top Exporting Countries | Raw Hides amp Skin and

Leather

43

27

2

16

11

164

103

77

61

42

00

20

40

60

80

100

120

140

160

180

Italy USA Brazil HongKong Germany

0

05

1

15

2

25

3

35

4

45

5

FY16

Billion US$ Share

Italyrsquos leather is among the best globally and being the 3rd largest leather producing country has

the most exports

Brazil being the second largest producer of leather exports in FY16 were majorly supported by

the growth in bovine leather

Hong Kong exports are majorly backed by imports

In FY16 Total

Raw hides amp skin

and leather

exports - $263

billion

Local Industry | Introduction

Tanning industry is an export oriented industry of Pakistan The industry

comprises of 6 sub-sectors such as tanning leather garments leather gloves

leather footwear leather shoe uppers and leather goods

During 1950s well equipped tanneries were set up in Karachi and Lahore while

during 60s and 70s more units were established in Hyderabad Kasur Sialkot

Multan Sahiwal and Gujranwala

Tanning industry stands the second largest after textile in contributing to the

total foreign exchange earnings of the country ie 5 In FY16 Leather exports

were $098 billion and total exports of Pakistan stood at $208 billion

Pakistan Tannery industry has an estimated production capacity of 90 million

sq meters and its actual production is around 60 million sq meters

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Top Importing countries | Raw Hides amp

Skin and Leather

58

3318 16 12

215

124

69

6043

0

5

10

15

20

25

China Italy Hong Kong Vietnam Mexico

FY16

Billion US$ Share

In FY16 the total leather imports were $26 billion

China being the largest leather market for couple of years is the highest importer of Raw Hides

amp Skin

In FY16 Total

Raw hides amp skin

and leather

imports - $268

billion

Top Exporting Countries | Raw Hides amp Skin and

Leather

43

27

2

16

11

164

103

77

61

42

00

20

40

60

80

100

120

140

160

180

Italy USA Brazil HongKong Germany

0

05

1

15

2

25

3

35

4

45

5

FY16

Billion US$ Share

Italyrsquos leather is among the best globally and being the 3rd largest leather producing country has

the most exports

Brazil being the second largest producer of leather exports in FY16 were majorly supported by

the growth in bovine leather

Hong Kong exports are majorly backed by imports

In FY16 Total

Raw hides amp skin

and leather

exports - $263

billion

Local Industry | Introduction

Tanning industry is an export oriented industry of Pakistan The industry

comprises of 6 sub-sectors such as tanning leather garments leather gloves

leather footwear leather shoe uppers and leather goods

During 1950s well equipped tanneries were set up in Karachi and Lahore while

during 60s and 70s more units were established in Hyderabad Kasur Sialkot

Multan Sahiwal and Gujranwala

Tanning industry stands the second largest after textile in contributing to the

total foreign exchange earnings of the country ie 5 In FY16 Leather exports

were $098 billion and total exports of Pakistan stood at $208 billion

Pakistan Tannery industry has an estimated production capacity of 90 million

sq meters and its actual production is around 60 million sq meters

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Top Exporting Countries | Raw Hides amp Skin and

Leather

43

27

2

16

11

164

103

77

61

42

00

20

40

60

80

100

120

140

160

180

Italy USA Brazil HongKong Germany

0

05

1

15

2

25

3

35

4

45

5

FY16

Billion US$ Share

Italyrsquos leather is among the best globally and being the 3rd largest leather producing country has

the most exports

Brazil being the second largest producer of leather exports in FY16 were majorly supported by

the growth in bovine leather

Hong Kong exports are majorly backed by imports

In FY16 Total

Raw hides amp skin

and leather

exports - $263

billion

Local Industry | Introduction

Tanning industry is an export oriented industry of Pakistan The industry

comprises of 6 sub-sectors such as tanning leather garments leather gloves

leather footwear leather shoe uppers and leather goods

During 1950s well equipped tanneries were set up in Karachi and Lahore while

during 60s and 70s more units were established in Hyderabad Kasur Sialkot

Multan Sahiwal and Gujranwala

Tanning industry stands the second largest after textile in contributing to the

total foreign exchange earnings of the country ie 5 In FY16 Leather exports

were $098 billion and total exports of Pakistan stood at $208 billion

Pakistan Tannery industry has an estimated production capacity of 90 million

sq meters and its actual production is around 60 million sq meters

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Local Industry | Introduction

Tanning industry is an export oriented industry of Pakistan The industry

comprises of 6 sub-sectors such as tanning leather garments leather gloves

leather footwear leather shoe uppers and leather goods

During 1950s well equipped tanneries were set up in Karachi and Lahore while

during 60s and 70s more units were established in Hyderabad Kasur Sialkot

Multan Sahiwal and Gujranwala

Tanning industry stands the second largest after textile in contributing to the

total foreign exchange earnings of the country ie 5 In FY16 Leather exports

were $098 billion and total exports of Pakistan stood at $208 billion

Pakistan Tannery industry has an estimated production capacity of 90 million

sq meters and its actual production is around 60 million sq meters

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Tannery Industry | Overview

Leather Tanners

Leather Product

Manufacturing Units

Local MarketInternational

Market

114

39

15 143 2 1

Karachi Lahore kasur Sialkot Sheikhupura Multan Sahiwal

FY17

Members Of PTA

There are around 800 tanneries in the country of

which 188 are members of Pakistan Tanners

Association

Tanners and manufacturers of leather and leather

garments are more dominant in the southern zone

of Pakistan Northern zone is more prominent for

the exporters and importers

Tannery Industry | Imports and Input cost

Raw material (chemical dyes pigments etc)

Rent amp Rates (electricity rental)

Stahl and BASF the major leather

chemical manufacturers and

suppliers have raised prices of

their products worldwide from 5

to 15

Raw hides and skin

httpswwwlaconceriaitenchemicalchemicals-to-face-new-price-rise-as-stahl-announce-they-will-raise-auxiliaries-to-510-cent

41

61

Imports in Million US$

July-June16 July-June 15

Pakistanrsquos raw hides and skin imports

dropped in FY16 as a result of lower

exports due to global leather recession

and sluggish demand for leather

products especially leather footwear

Local Industry | Export Performance

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Leather

38

Leather

Garments

32

Leather

Gloves

20

Leather

Footwear

9

Other

Leather

products

1

share of leather and leather products

in export performance FY17

Leather Leather Garments

Leather Gloves Leather Footwear

Other Leather products

11447

1275311958

97779182

00

2000

4000

6000

8000

10000

12000

14000

2012-13 2013-14 2014-15 2015-16 2016-17

Export performance of leather and

leather products from Pakistan in all

5 sectors

Value in millions US $

The downturn in exports intensified with leather garments falling by 168 in FY17 as against to falling by

65 in FY16 Leather gloves dived by a whopping 286 in FY16 while falling by 51 in the last year

The lower exports also driven by seasonal effect and volatility in fashion trends

Tannery Industry | Imports and Input cost

Raw material (chemical dyes pigments etc)

Rent amp Rates (electricity rental)

Stahl and BASF the major leather

chemical manufacturers and

suppliers have raised prices of

their products worldwide from 5

to 15

Raw hides and skin

httpswwwlaconceriaitenchemicalchemicals-to-face-new-price-rise-as-stahl-announce-they-will-raise-auxiliaries-to-510-cent

41

61

Imports in Million US$

July-June16 July-June 15

Pakistanrsquos raw hides and skin imports

dropped in FY16 as a result of lower

exports due to global leather recession

and sluggish demand for leather

products especially leather footwear

Local Industry | Export Performance

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Leather

38

Leather

Garments

32

Leather

Gloves

20

Leather

Footwear

9

Other

Leather

products

1

share of leather and leather products

in export performance FY17

Leather Leather Garments

Leather Gloves Leather Footwear

Other Leather products

11447

1275311958

97779182

00

2000

4000

6000

8000

10000

12000

14000

2012-13 2013-14 2014-15 2015-16 2016-17

Export performance of leather and

leather products from Pakistan in all

5 sectors

Value in millions US $

The downturn in exports intensified with leather garments falling by 168 in FY17 as against to falling by

65 in FY16 Leather gloves dived by a whopping 286 in FY16 while falling by 51 in the last year

The lower exports also driven by seasonal effect and volatility in fashion trends

Local Industry | Export Performance

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Leather

38

Leather

Garments

32

Leather

Gloves

20

Leather

Footwear

9

Other

Leather

products

1

share of leather and leather products

in export performance FY17

Leather Leather Garments

Leather Gloves Leather Footwear

Other Leather products

11447

1275311958

97779182

00

2000

4000

6000

8000

10000

12000

14000

2012-13 2013-14 2014-15 2015-16 2016-17

Export performance of leather and

leather products from Pakistan in all

5 sectors

Value in millions US $

The downturn in exports intensified with leather garments falling by 168 in FY17 as against to falling by

65 in FY16 Leather gloves dived by a whopping 286 in FY16 while falling by 51 in the last year

The lower exports also driven by seasonal effect and volatility in fashion trends

Trend Analysis | Export Of Leather And Leather Products (2013-14 TO 2016-17) VALUE = (US Dollars in Thousand)

Export oriented leather goods manufacturing which is directed towards apparel suffers from seasonal demand and

fashion trend variation Impacting negatively on competitiveness Exports have been in a declining trend due to volatile

fashion trends worldwide The decline in exports led the piling up of stocks in the tanneries and have compelled leather

producers to slow production

SNo Commodities

FY14 FY15 FY16 FY17

Quantity Value AUP Quantity Value AUP Quantity Value AUP Quantity Value AUP

01

Leather Tanned

(000lsquo SQM) 29349 551413 188 22272 489412 219 17072 362753 213 24562 345587 141

02

Apparel amp

Clothing of

Leather

(000 Pcs)

16668 406254 244 11544 365738 317 10812 320525 297 8904 291886 328

03Leather Gloves

(000 Pairs)47682 202548 43 42564 216914 51 30402 191157 63 29238 187676 64

04Leather Footwear

(000 Pairs)7398 98803 134 6919 109761 159 5744 89151 155 5766 80889 14

05

Leather

Manufactures

others

(000lsquo Kgslsquo)

1366 16311 119 1068 13988 131 1150 14098 129 - 12205 -

TOTAL -

1275329- -

1195813- -

977684- -

918243-

httpwwwpakistantannersorgdocumentsannualreport2017pdf

Exports have declined for the third consecutive year a host of factors explain this sharp decline

During the Eid season large quantities of raw material are damaged due to high temperatures and

inadequate preservation mechanisms This negatively impacted the production potential of the industry

and increased its dependence on imports

High cost of doing business ie electricity tariffs gas charges and workersrsquo wages are higher in

Pakistan relative to global competitors Furthermore the interruptions in the energy supply(electricity

gas and water) has hampered the industry

Smuggling of animals and substitutes of Leather oriented product are the elevating negative factors

affecting the businesses

Pollution caused by tanneries is a serious environmental issue this may compel the government to

restrict the tanners to operate within populated areas

Industry Performance | Challenges

Comparative Analysis | Pakistan Vs Major Competitors

Pakistan is the only country in the region that has experienced a negative export growth in its

leather and leather products

Over the last five years - A positive growth managed by China and India 47pc and 40pc

respectively despite the global slowdown in the Euro zone and global price crash

Since the declining trends started of in 2015 - leather and leather products exports recorded a

fall of 62 per cent to $12bn in 2014-15 from $13bn in 2013-14

Export of leather jackets declined by 19pc gloves by 165pc footwear by 31pc during the

first five months of 2015-16

Pakistan is at a disadvantage for couple of factors

Pakistan gives around 1pc duty drawback rebate on all categories of leather exports India and

China have allowed 6pc and 75pc respectively

Power tariff in India stands at 9 cents per unit and in China at around 7-8 cents whereas the

local industry has to pay 14 cents per unit

Prolonged delays in the payments of refunds and duty drawbacks along with imposition of a 4

percent customs duty and 17 percent sales tax on import of machinery has negatively

impacted the industry

Analysts Raniya Tanawar

Financial Analyst

raniyatanawarpacracom

Saliha Sajid

Associate Analyst

Salihasajidpacracom

Jhangeer Hanif

Unit Head ndash Ratings

jhangeerpacracom

Contact Number +92 42 3586 9504

DISCLAIMERPACRA has used due care in preparation of this document Our information has been obtained from

sources we consider to be reliable but its accuracy or completeness is not guaranteed The information

in this document may be copied or otherwise reproduced in whole or in part provided the source is

duly acknowledged The presentation should not be relied upon as professional advice

Bibliographybull SBP Economic Data amp Publications

bull Pakistan Tanners Association

bull PACRA in-house database

bull httpsciviltipscomtop-7-leather-producing-countries-in-the-world

bull httpswwwbrecordercom20171018375465leather-industry-a-case-for-concern

bull httpwwwleatherfairaplfcomen-usnews-and-blognews

bull httpwwwpakistaneconomistcom20171225leather-industry-review

bull httpwwwleatherfairaplfcomen-usnews-and-blognews

bull httpwwwinvestinindiacomindustryleatherleather-industry

bull httpwwwindia-exportscomleatherhtml

bull httpwwwsbporgpkpublicationsimport2017Nov2pdf

bull httpwwwtdapgovpktdap-statisticsphp

bull httpswwwdawncomnews1231898

bull httpswwwtrademaporgleatherlineCountry_SelProduct_TSaspxnvpm=1|||||41|||2|1|1|1|2|1|2|1|1

bull httpswwwthenewscompkarchiveprint182747-leather-exports-drop-20pc-tanneries-closed

Comparative Analysis | Pakistan Vs Major Competitors

Pakistan is the only country in the region that has experienced a negative export growth in its

leather and leather products

Over the last five years - A positive growth managed by China and India 47pc and 40pc

respectively despite the global slowdown in the Euro zone and global price crash

Since the declining trends started of in 2015 - leather and leather products exports recorded a

fall of 62 per cent to $12bn in 2014-15 from $13bn in 2013-14

Export of leather jackets declined by 19pc gloves by 165pc footwear by 31pc during the

first five months of 2015-16

Pakistan is at a disadvantage for couple of factors

Pakistan gives around 1pc duty drawback rebate on all categories of leather exports India and

China have allowed 6pc and 75pc respectively

Power tariff in India stands at 9 cents per unit and in China at around 7-8 cents whereas the

local industry has to pay 14 cents per unit

Prolonged delays in the payments of refunds and duty drawbacks along with imposition of a 4

percent customs duty and 17 percent sales tax on import of machinery has negatively

impacted the industry

Analysts Raniya Tanawar

Financial Analyst

raniyatanawarpacracom

Saliha Sajid

Associate Analyst

Salihasajidpacracom

Jhangeer Hanif

Unit Head ndash Ratings

jhangeerpacracom

Contact Number +92 42 3586 9504

DISCLAIMERPACRA has used due care in preparation of this document Our information has been obtained from

sources we consider to be reliable but its accuracy or completeness is not guaranteed The information

in this document may be copied or otherwise reproduced in whole or in part provided the source is

duly acknowledged The presentation should not be relied upon as professional advice

Bibliographybull SBP Economic Data amp Publications

bull Pakistan Tanners Association

bull PACRA in-house database

bull httpsciviltipscomtop-7-leather-producing-countries-in-the-world

bull httpswwwbrecordercom20171018375465leather-industry-a-case-for-concern

bull httpwwwleatherfairaplfcomen-usnews-and-blognews

bull httpwwwpakistaneconomistcom20171225leather-industry-review

bull httpwwwleatherfairaplfcomen-usnews-and-blognews

bull httpwwwinvestinindiacomindustryleatherleather-industry

bull httpwwwindia-exportscomleatherhtml

bull httpwwwsbporgpkpublicationsimport2017Nov2pdf

bull httpwwwtdapgovpktdap-statisticsphp

bull httpswwwdawncomnews1231898

bull httpswwwtrademaporgleatherlineCountry_SelProduct_TSaspxnvpm=1|||||41|||2|1|1|1|2|1|2|1|1

bull httpswwwthenewscompkarchiveprint182747-leather-exports-drop-20pc-tanneries-closed

Analysts Raniya Tanawar

Financial Analyst

raniyatanawarpacracom

Saliha Sajid

Associate Analyst

Salihasajidpacracom

Jhangeer Hanif

Unit Head ndash Ratings

jhangeerpacracom

Contact Number +92 42 3586 9504

DISCLAIMERPACRA has used due care in preparation of this document Our information has been obtained from

sources we consider to be reliable but its accuracy or completeness is not guaranteed The information

in this document may be copied or otherwise reproduced in whole or in part provided the source is

duly acknowledged The presentation should not be relied upon as professional advice

Bibliographybull SBP Economic Data amp Publications

bull Pakistan Tanners Association

bull PACRA in-house database

bull httpsciviltipscomtop-7-leather-producing-countries-in-the-world

bull httpswwwbrecordercom20171018375465leather-industry-a-case-for-concern

bull httpwwwleatherfairaplfcomen-usnews-and-blognews

bull httpwwwpakistaneconomistcom20171225leather-industry-review

bull httpwwwleatherfairaplfcomen-usnews-and-blognews

bull httpwwwinvestinindiacomindustryleatherleather-industry

bull httpwwwindia-exportscomleatherhtml

bull httpwwwsbporgpkpublicationsimport2017Nov2pdf

bull httpwwwtdapgovpktdap-statisticsphp

bull httpswwwdawncomnews1231898

bull httpswwwtrademaporgleatherlineCountry_SelProduct_TSaspxnvpm=1|||||41|||2|1|1|1|2|1|2|1|1

bull httpswwwthenewscompkarchiveprint182747-leather-exports-drop-20pc-tanneries-closed