Eid brings no relief as exports slump, tariff pressures mount on tanners

Infographic: TBS

As Eid approaches, Bangladesh's leather industry finds itself in distress – hit hard by falling export prices, rising production costs, and growing pressure from the US-China trade war, which is prompting Chinese buyers to shift tariff burdens onto local exporters.

Industry insiders say Chinese importers are demanding 10-15% price cuts, citing increased costs due to global trade tensions. But with Eid requiring immediate liquidity for rawhide procurement, tanneries are struggling to cope.

Currently, 100 to 120 containers of processed leather are stuck in local factories, awaiting shipment clearance amid delays in buyer confirmation.

"About 25% to 30% of last year's hides remain unsold," said Md Sakhawat Ullah, senior vice president of the Bangladesh Tanners Association (BTA) and owner of Salma Tannery. "We need urgent cash to buy hides this Eid, but Chinese buyers are asking for discounts we can't afford. Margins are already razor-thin."

He noted the industry's overreliance on China due to the absence of Leather Working Group (LWG) certification, which limits access to global markets.

"This dependency has given Chinese buyers the upper hand. With renewed tariff pressure, leather prices have dropped 10-15% year-on-year, while our production costs continue to climb."

Among the rising costs squeezing the leather industry, minimum wages for workers have increased from Tk13,500 to Tk18,500, while the price of salt – crucial for preserving hides – has surged by Tk300 per 74-kg sack, reaching Tk1,000.

According to insiders, the industry requires around 1 lakh tonnes of salt during Eid. At the same time, bank interest rates have climbed steeply, jumping from 9% to as high as 16%.

Sarwar Hossain, head of the Salt Cell at Bangladesh Small and Cottage Industries Corporation (BSCIC), disputed the claim of a sharp price hike. "Compared to last year, salt prices are actually lower," he said. "Field-level salt in Cox's Bazar is Tk270 per maund this year, down from Tk300 last year. At the mill level, it's Tk13 per kg – down from Tk18."

Exports in decline

According to the Export Promotion Bureau (EPB), leather exports dropped by 8.24% year-on-year in the first ten months (July-April) of FY25, from $117.27 million to $107.61 million.

Data from a tannery at the BSCIC Tannery Industrial Estate paints a starker picture. The factory exported 76.59 lakh square feet of leather in the same period last fiscal year, earning Tk63.6 crore. This year, exports fell to 54.13 lakh square feet, with earnings down to Tk39.37 crore. The average price per square foot dropped from Tk83.08 to Tk72.74 – a 12.44% decline.

"Leather prices in the Chinese market have dropped by at least 15% this year compared to last year. Before relocating from Hazaribagh to Hemayetpur in Savar, we used to sell leather at $1.40 per square foot," said Imam Hossain, executive member of BTA and managing director of ABS Tannery.

"Now, we're having to sell it in the Chinese market for just $0.45. Even last year, we sold this leather at $0.75."

He added, "Around 8 lakh square feet of leather are ready to ship, but buyers aren't confirming orders. About 30% of last year's hides are still unsold. Add to that the Tk300 increase per salt sack, 20% of hides affected by lumpy skin disease, and a cash crunch – it's a nightmare."

Imam Hossain called for immediate government action. "The only solution is LWG certification. The government must invest in solving CETP and waste management issues, or the sector will face even darker days."

Ashiqur Rahman, vice chairman of BTA and owner of Tazin Leather Corporation, warned that any increase in rawhide prices this Eid would further strain the sector. "Around 90% of the leather used in the local footwear market is imported under bonded facilities, so our market share is limited."

CETP upgradation

Despite repeated industry calls, there is still no clear roadmap for upgrading the Central Effluent Treatment Plant (CETP) at the Savar Tannery Estate – critical for LWG certification.

Md Golam Shahnewaz, managing director of Dhaka Tannery Industrial Estate Waste Treatment Plant Company Ltd, said efforts are finally underway.

"The EU is funding a 15-month project that began in March to assess CETP's capacity, design, and solid waste management," he said. "Based on expert recommendations, a comprehensive roadmap will be developed."

In addition, a Tk10 crore "safe landfill" project is being implemented with funding from the Bangladesh Climate Change Trust Fund to curb pollution from solid waste entering the Dhaleshwari River. Of the 1,710 points required for LWG certification, 150 relate to solid waste.

A private firm has also been contracted to collect shaving dust daily for chromium separation and protein extraction. CETP overhauls are ongoing ahead of Eid-ul-Azha, Shahnewaz said, adding, "Compared to any previous time, CETP is now in a better position."