IDMIB/Karaca: Leather Export Decline Slows, Sector on the Rise

Foreks - The 13th Leather and Fur Fashion Fair, organized by the Turkish Leather Garment Manufacturers Association (TDKD), has opened its doors in Antalya. Despite the leather sector starting the year with a decline in exports reaching up to 30%, Turkey Exporters Assembly (TIM) Leather and Leather Products Sector Committee Chairman and Istanbul Leather and Leather Products Exporters Union (IDMIB) Board Chairman Güven Karaca noted that this rate has decreased to 18% as the year comes to a close. He stated that they view the slowdown in the rate of decline positively, believing the sector has entered a phase of recovery. Karaca mentioned that firms in the sector do not have financial issues; they are simply protecting themselves because they do not want to operate at a loss, and he expressed confidence that they would rebound quickly as soon as they see a light ahead. Cengiz Sarıgül, Chairman of the Turkish Leather Garment Manufacturers Association (TDKD), highlighted the rising costs in Turkey, noting that for the first time, labor costs have surpassed raw material costs. He emphasized that the fair held in Antalya during these challenging times has created great energy and morale for the sector.

The Leather & Fur Fashion Fair, organized by the Turkish Leather Garment Manufacturers Association (TDKD), has gathered representatives of Turkish firms in the leather industry with representatives from international markets, featuring nearly a thousand buyers from 14 countries and 68 firms from Turkey in Antalya. Taking place from December 12 to 15, the fair is expected to boost morale for the leather sector, which is caught between rising domestic costs and the destructive effects of a weak currency on exports.

‘WE VIEW THE SECTOR AS HAVING ENTERED A PHASE OF RECOVERY’ Güven Karaca, Chairman of the TIM Leather and Leather Products Sector Committee and IDMIB Board Chairman, stated that despite rising domestic costs, Turkey remains very expensive compared to its competitors in the leather industry due to the low foreign exchange rates. He added that the situation in Russia and Ukraine, which are target markets for Turkey, has also adversely affected the sector. He emphasized that they felt these impacts strongly at the beginning of the year, experiencing declines in exports nearing 30%. However, he noted that they have managed to reduce this decline to 18% towards the year-end, stating, "There is a slowdown in the rate of decline, and we now see it positively, believing the sector has entered a phase of recovery. I do not anticipate we will fall from this point."

Karaca underscored the significant importance of the leather and leather garment sectors for Turkey's exports, reminding that in 2022, they exceeded 2 billion USD. He emphasized that in leather garments, the export per kilogram stands at 200 USD, making it the second highest sector after jewelry, while Turkey's average export per kilogram is only 1.70 USD. He remarked, "We produce value-added products; we know how valuable our profession is and how much it contributes to the Turkish economy. Ultimately, you are selling a product with an average of 200 USD. Even a 10% increase in price could significantly impact the Turkish economy."

‘NO FIRM IS IN A DIFFICULT POSITION, THEY HAVE REDUCED CAPACITY TO AVOID LOSS’ Addressing reports of some firms in difficulty within the sector, Karaca stated that the infrastructure and financial status of firms in the leather sector are quite good, and there has been no financial problem. He emphasized that the current issue is one of profitability, stating, "We do not do this just for the sake of it; we do it for profit. We do not engage in businesses where we do not see profit; therefore, we protect ourselves. In the current environment, everyone has reduced their capacity and moved to a wait-and-see approach, which has led to a decline in exports. If we start to stabilize our prices, see profitability, and ease access to financing — in other words, when we see the light and profitability, and the manufacturing environment improves — I am confident that the sector will quickly recover and rise again. The leather sector is very dynamic. Regardless of how many orders come in, we are capable of producing within a week. Therefore, we do not fear declines. We can quickly recover from an 18% drop. Our sector has learned a lot from the crises it has faced in the past, so it reacts swiftly to opportunities and threats. We have no concerns on that front."

THE FAIR KEEPS THE SECTOR VIBRANT, GATHERING ALL BUYERS IN ANTALYA Cengiz Sarıgül, President of the Turkish Leather Garment Manufacturers Association (TDKD), also highlighted the high costs in Turkey, saying for the first time, labor costs have surpassed raw material costs. He emphasized that the fair held in Antalya during these tough days has created a lot of energy and morale for the sector, stating, "The sector is keeping itself alive through this fair. We are actually doing a favor to our customers by bringing them all to this fair; we keep that energy alive for ourselves and try to energize them. We hold the fair every six months, presenting 4-5 thousand new models. Our fair started today, and approximately a thousand buyers have come from 14 countries. We have 68 firms from Turkey. Even people who would normally not buy goods come here, and upon seeing the atmosphere and variety, they end up placing orders."

Sarıgül emphasized that historically, Russia and neighboring countries have been Turkey's most important market for leather, pointing out that the situation in Russia has also influenced the decline in exports. He indicated that Turkey does not only sell to Russia, but that Russian tourists who traveled to Europe in the past were also significant buyers. He noted, "Russia is actually a market for everyone, not just us. European brands sell our products to Russia after localizing them in their countries. Leather garments are somewhat different, with America and France leading the way, which is a significant source of pride for us."

He further added that Ukraine represents a very important market for the Turkish leather sector, stating, "If Ukrainians could travel freely, at least 300-400 more buyers would come. Right now, we are trying to keep those who are already active in this business alive because we must not lose that market. There are countries like India, Pakistan, and China entering the region with very low prices; their prices are nearly half of ours. Customers are willing to pay us 20% more for our quality products, but we have doubled our prices. Unfortunately, the gap has widened significantly."

THE SECTOR IS PROTECTING ITSELF Sarıgül stated that the sector is currently in a protective mode and wants to see developments, adding, "However, right now, if a large order comes at this fair, everyone can adapt and produce all the goods within a week or ten days. Even with reduced capacities, everyone in the sector can communicate with each other and produce whatever is needed immediately. I have not heard of a facility with a capacity of 10,000 jackets being unable to fulfill an order for 20,000 jackets. Our leather garment sector possesses that kind of dynamism and strength. We are accustomed to delivering goods within 3-4 days. Currently, our entire sector is in direct contact with our customers. We are addressing their issues, sacrificing profit and offering all possible price alternatives to keep them afloat."