South American Leather Market 2025: Challenges and Shifts in Global Supply Chains

Price Volatility and Industry Contraction

The South American leather market continues to face significant challenges, driven by fluctuating raw material prices and environmental scrutiny. In Brazil, the world’s third-largest bovine hide producer, tanneries have struggled with declining profitability due to low prices for wet-blue hides. For instance, typical quotes for TR1 full-grain wet-blue hides hover around $1.55–$1.65 per square foot (cost and freight), but buyers increasingly demand lower rates, squeezing margins for suppliers1. This pressure has led to factory closures, such as JBS SA’s shutdown of a 70-year-old tannery in São Paulo’s Aguai city, displacing 400 workers, as the company reallocates resources to focus on cost-efficient operations in northeastern Brazil1.

Meanwhile, Argentina’s leather sector, which accounts for 70% of its total commodity exports, remains a key player in premium automotive and footwear leathers. However, global buyers are growing wary of supply chain ethics, particularly after reports linked Brazilian leather to illegal deforestation in the Amazon2.

Environmental Pressures and Corporate Accountability

Environmental concerns are reshaping procurement strategies. Following the 2019 Amazon wildfires, major brands like VF Corporation (owner of Timberland, Vans, and The North Face) halted Brazilian leather purchases, citing an inability to guarantee responsible sourcing2. Although Brazil’s government claims progress in fire control—reducing blazes by 31% after military intervention—international skepticism persists2.

Brazilian tanneries are now under pressure to adopt traceability measures. JBS SA, the country’s largest leather producer, faces allegations of sourcing cattle from illegally deforested lands, despite denials2. These challenges coincide with stricter EU regulations, such as the Corporate Sustainability Reporting Directive (CSRD), compelling suppliers to prove ethical practices.

Export Dynamics and Geopolitical Shifts

Brazil’s leather exports, valued at $1.44 billion in 2018, traditionally target the U.S., China, and Italy2. However, recent trade diversification efforts aim to leverage China’s Belt and Road Initiative (BRI). For example, Peru’s Chancay Port expansion (operational by 2025) is expected to streamline logistics between South America and Asia, reducing shipping costs by 30% and opening new markets for Brazilian hides1.

China’s growing automotive and footwear industries further drive demand. Yet, price sensitivity remains a hurdle. Brazilian exporters face competition from synthetic alternatives and cheaper Asian suppliers, forcing a pivot toward high-value niches like eco-certified or bio-based leathers.

Innovation and Adaptation

To counter these challenges, South American tanneries are investing in sustainable practices:

1. Circular Economy Initiatives: Argentina plans to convert 30% of leather waste into recycled materials by 2026, reducing landfill dependency1.

2. Bio-Based Alternatives: Partnerships with Chinese firms aim to replace traditional tanning chemicals with plant-derived solutions, aligning with global ESG trends2.

3. Digital Trade Platforms: Brazil’s new B2B leather marketplace uses blockchain to trace hides from ranch to factory, enhancing transparency1.

Future Outlook

By 2026, South America’s leather industry is poised to balance cost competitiveness with sustainability. Key developments include:

• Carbon-Neutral Certification Programs: Targeting EU compliance for automotive leather exports.

• Expansion in Asia-MENA Markets: Leveraging events like the 2024 Saudi Apparel Leather & Textiles Expo to access Gulf markets3.