WHILE not the most fashionable good produced by Australia, the value of our exports of skins and hides has been increasing steeply since the global financial crisis.
The export of raw hides, skins and leather doubled between 2009 and 2013, to $1.19 billion in sales, and fur skins and artificial fur exports increased by 177 per cent in the period.
While the supply of hides and skins covers sheep, cattle, goats, kangaroos, rabbits and deer, the industry is largely dependent on the annual kills of cattle and sheep in our abattoirs. Within this finite resource of raw materials the volatile global markets for animal hides allows canny exporters to find and grow niche markets, finding higher prices where specific types of skin are required by certain manufacturers.
"The market for sheep and lamb skins hit a peak three years ago," Australian Lamb Skin Processors managing director Darren Vinton says. "The raw material [sheepskin] is worth 50 per cent what it was two years ago."
Vinton says the global market for Australian sheepskins is driven by two main territories: Russia, for clothing and shoes; and China, for Ugg boots, car-seat covers, baby accessories, paint rollers and buffing pads. China is a relatively stable market because of the steady demand for what they make and sell. However, the price of Australian sheepskins can be driven by the severity of the northern European winter, which drives the production from the Russian factories.
The Chinese factories also export half their production to Russia, where sheepskin coats, boots, hats, gloves and car-seat covers are a popular way of staying warm through the long winters.Russian manufacturers even use a specific Australian lamb skin to make a fake mink.
Vinton says most of the sheepskin's manufactured value is now captured offshore because Australia's "green tape" is so onerous that many small and medium manufacturers find it too expensive to comply with water and chemical regulations. Most sheepskins are salt-cured for export as a full pelt, with a small industry of local manufacturers still making Ugg boots and coats.
Australia's decline in sheepskin manufactures has seen a rise in Chinese wholesalers setting up in Australia, exporting directly to Chinese factories.
In spite of the rising sheepskin trade, Vinton says the current price of $10 a skin is well down on the $20 of two years ago. The market for cattle hide exports is also growing in value and enjoys a broader spread, taking in Brazil and the United States, both of which were once self-sufficient in their hide needs. Australia – like the United States and Canada – operates in a free-trade environment, meaning hides can be exported simply salted, whereas in countries such as India and many South American countries, hides must at least be tanned before export.
Ian Stokes-Blake, managing director of Southern Hide Exports in Sydney, says the export hide industry has seen growth during the past five years. Australia is the world's fourth-largest supplier of hides but it is exposed to consumer trends. The heavier hides from animals weighing 250 kilograms or more are used for furniture and automotive upholstery, and their prices have stabilised at around $68 a hide.
But the sub-250 kilogram hides have fallen to $20 each. Over all the price has dropped 25 per cent since April. But it's the lightweight hides that have felt the main impact of global consumer patterns, Stokes-Blake says.
Lighter weights are used for shoes, and the footwear market in Europe is still suffering post-GFC
He says the lightweight hide market – which accounts for 40 per cent of Australian exports – is making a slow comeback because of changing consumer habits in Asia.
"European men might own 10 pairs of shoes and women own 20 pairs," he says. "In China or Indonesia, people typically own a half or a third as many shoes. But there's evidence that shoe ownership is changing in Asia with the expanding middle classes, and that will be good for our lightweight hide exports."