Raw Materials
Petroleum – Oil costs have caused increases in vinyl, nitrile, polyester, polyurethane and any other material based on petroleum products.
Leather – Tanned cow hides in China have become somewhat scarce due to stricter enforcement of importation regulations. The hides that are available are increasingly used for consumer goods that command higher prices than industrial products. Improvements in the processing of leather have created better looking hides from lower grade leather hides that were traditionally used to make industrial gloves. Many of the tanneries in China have had output reduced or simply closed due to the environmental impact that the tanning process creates. This has further reduced the availability of tanned hides.
Latex – Supplies are being squeezed and prices have been impacted largely by speculators in the commodities markets. Prices of latex will continue to be volatile. Value of Currency
The World Trade Organization has pressured China to allow the Yuan to float to a level that is more in line with other currencies around the world. There are claims that the Yuan is undervalued by as much as 25% and so the Chinese government is allowing the exchange rate to move, albeit at a very slow pace – 5% - 7% each year. The result is that the US dollar weakens with every escalation causing a rise in prices.
Environmental Concerns
The environment and worker safety and health are emerging as serious issues in China and its citizens. China is responding to concerns about pollution. I mentioned earlier the impact on tanneries. Factories that use some chemicals in their processes have often allowed their processes to be open to the air. Many of these processes now have to be contained and the air scrubbed prior to release into the environment.
Tax Rebates
The Chinese governments have traditionally paid exporters rebates on the taxes that they pay on exported goods. The US government has put pressure on China to reduce and/or eliminate these “manufacturing subsidies” to make the pricing of goods leaving China more aligned with true production costs. China has just reduced or eliminated these rebates on more than 2,800 types of goods. A recent article that appeared in the South China Morning Post of Hong Kong stated “”The Finance Ministry announced yesterday that rebates would be removed on 553 types of goods, such as cement, chemical products, fertilizers, salt and leather, which use large amounts of energy and resources, and cause high levels of pollution, in the production process.” The result will not likely slow the pace of exports because China will remain one of the most inexpensive sources of goods in the world, however the prices that we pay for virtually everything coming out of China will rise sharply in the coming months and years.
The Outlook
Leather products will continue to rise at a sharper rate than other products. Top grain leather and low-end split leather palmed gloves will see some of the most significant increases. Top grain leather cost increases are largely due to the shortage of industrial grade tanned hides. Low-end split leather palms will be less available as factories become more interested in producing products that generate higher profits for them. Availability of patch palm styles will diminish greatly, driving up costs, due to higher labor costs and competition for leather scraps from the shoe industry.
What should you do?
PIP has many alternatives that will assist you help your end-users. Many of the new technologies in gloves today produce both economically and functionally viable alternatives to traditional styles of gloves. Use this shift in pricing as an opportunity to validate initiatives to try new gloves. Call your PIP sales representative to discuss your end-user’s applications and the options.
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