The Producer Price Index for shoe industry has exceeded the general inflation and Iran-made shoes lost their comparative advantage in exports, Ali Lashgari, a member of Iran Shoe Industry Association, says.
The official added that shoe exports in the first quarter of the current Iranian year (March 21-June 21) decreased by 6.8% in value and 16% in weight compared with the same period of last year.
“The average export of shoes in the last four years [March 2017-21] stood at 32,000 tons worth $98 million annually, i.e., $3.3 per kilogram on average. A total of 46,000 tons of shoes worth $105 million with an average price of $9.2 per kilogram were exported last year [March 2020-21] indicating a 28.9% and 36.7% increase in value and weight year-on-year,” he was quoted as saying by Tehran Chamber of Commerce, Industries, Mines and Agriculture’s news portal.
“Iran exported 7,345 tons of shoes worth $18 million [$2.47 per kilogram on average] during the first quarter of the current year, registering a decrease of 8.6% in value and 16% in weight compared with the same period of last year. The average price per kilogram of this exported item rose by 8.6% year-on-year.”
Lashgari noted that Iraq, Afghanistan and Azerbaijan account for 90% of Iran’s shoe exports; Iraq with 50%, Afghanistan with 18% and Azerbaijan with 13.8% are Iran’s main trading partners in terms of value and they are followed by Pakistan, Turkmenistan and Armenia.
He blamed fluctuations in foreign exchange rate in the early months of the Iranian year and the 40% inflation rate for the decline in exports of shoes.
“Producer inflation for the shoe industry exceeded the general inflation rate in Q1. Despite the depreciation of local currency against the US dollar, costs incurred by factories, which are out of the control of industrial managers, have resulted in an immense pressure on the industry and a runaway inflation. For example, the annual inflation rate of shoe industry stood at 42.7 in the month ending June 21 compared with 37.9% in the month ending April 20. The year-on-year inflation rate of shoes stood at 51.6%, 53.8% and 56.3% in the months ending April 20, May 21 and June 21, respectively, compared with the annual and year-on-year inflation of 34.5% and 26.4% in the month ending June 20, 2020,” he said.
Noting that shoe industry creates as many jobs as car industry in Iran (500,000 jobs), Lashgari said, “The increase in overhead expenses, including wages, transportation and fuel, overshadows the costs of raw materials. This increase cannot be compensated even with the depreciation of the local currency against US dollar.”
