Euro crisis affects Kanpur leather industry

03 Jul '10

2 min read

Kanpur-based leather industry has been severely battered, owing to the Euro zone crisis. The city's leather industry runs to the tune of Rs 7,000 a year.

The producers and exporters were just reviving from the world economic meltdown by finding relief in the European markets. But the unexpected euro crisis has dejected them.

The depreciation in Euro from a range of Rs 68-70 to Rs 57 had resulted to constricting margins for exporters. Europe totals for about 80 percent of the city's leather exports, following the US economic downturn, experienced around the world last year.

Owing to reducing rates of exchange, exports have also reduced pace and their operations are severely hurt. Declining Euro is likely to result in job losses or sales of goods at cost price, which might affect exporter's profits.

Therefore, Euro fall has also pressurised exporters to reduce prices. More so, inventory sizes are also being reduced by exporters, owing to which buyers are demanding delivery in a time period of 40 days, as compared to the earlier time duration of six months.

In addition to the aforesaid problems, large number of exporters are now pressed upon flying their deliverables, against using the sea way. Thereby, adding an additional transportation cost. Therefore, the price of one jacket has risen from 60 cents to $2.

Buyers on the other hand are going slow on their purchase. This is because; they purchase products in dollars, but have to remove more euros for each dollar, as euro has depreciated against US dollar. This has further created, an ambiguity for the future, as buyers prefer to go slow, till the market and the currency stabilises.

Exporters have become smarter with the crisis, as to come out of the crisis, existing in the international markets, state exporters are reaching out to other export nations such as Africa and Latin America.

An exporter informs that, they are in touch with entrepreneurs in Latin American countries such as Mexico, Uruguay, Paraguay, Chile, Argentina and Brazil, for possible future trade in food processing and medicine sections.

As payment commitments from clientele in European nations gets clearer by July-August, the impact of euro crisis on the sector will also be known.

But the worst hit with the falling euro are the Small and Medium enterprises (SMEs), as they function on smaller profit margins and turnovers, which are highly affected by currency fluctuations.

Fibre2Fashion News Desk - India

More General News - India...