Global lambskin prices collapsed

Global lambskin prices have collapsed from the first quarter's record highs. Photo / Thinkstock

Global lambskin prices have collapsed from the first quarter's record highs, as a Chinese crackdown on polluting tanneries and Russian trade sanctions sapped demand.

The price for third-grade lambskins, a benchmark for leather garments, has fallen below US$50 per dozen from a record high of US$95/dozen in the first quarter of this year, according to Invercargill-based Alliance Group, the world's largest processor and exporter of sheepmeat.

The skins are currently fetching about US$45-$50/dozen with the price expected to decline to US$40-$45/dozen, the farmer co-operative said. Prices generally fluctuate between US$50-$70/dozen.

The leather market is facing multiple headwinds after tougher environmental regulations in China, where New Zealand sells as much as 60 per cent of its lambskins, led to the sudden shutdown of many tanneries in April.

At the same time, consumer demand has dropped away for leather products such as jackets and handbags, reflecting a slowdown in the Chinese domestic market and a decline in demand from Russia amid trade sanctions over its incursions into Ukraine.

"There have been downturns like this before but not quite as severe," said Carl Alsweiler, Alliance Group's marketing manager, general products.

"The key factor here is demand for leather product has to be strong for the prices to be strong.

"But this time it has been a double hit because we have had a downturn in consumer demand and also quite a large chunk of processing capacity just knocked out of the system in China with these pollution shutdowns."

That has left many Chinese tanners "holding stock that they can't process now and they have had to resell their stock on the market," he said.

China has closed many tanneries because of Beijing's heightened focus on water and air pollution.

The world's second-largest economy passed its first amendments to the country's environmental protection law in 25 years in April, following premier Li Keqiang's statement at an annual parliamentary meeting in March that the Government would "resolutely declare war against pollution as we declared war against poverty".