Chinese processors concerned about wool production trends

Terry Sim, September 17, 2014

wool bales1Chinese processors were worried about Australia’s supply of wool 19 microns and broader, and our declining clip generally, Australian Wool Innovation trade consultant Scott Carmody said this week.

Just back from the annual two-day trading conference in Nanjing, China, where Australian exporters were among more than 500 participants, Mr Carmody said the Chinese were buoyant about business for most wool types but unfortunately not for wool under 19 microns.

“One of the more impressive things I heard was that the Chinese are now talking about the lack of supply out of Australia and they are also talking about the lack of exporters out of Australia.

“They are finding it increasingly difficult now to get people to offer them substantial volumes wool for a start,” he said.

“In the past they were able to write the business they needed for the next month or two within one week, they are now finding it takes two or three weeks before the Australians will settle for the quantities they need.”

Fine wool quantities up while production falls

Analysis of AWEX auction volumes shows that Australia sold 498,722 bales of wool 19.5 microns and finer at auction in 1995 and 858,277 bales in 2013, while the nation sold 2,703,898 bales of wool 19 microns and broader in 1995 and 970,826 bales last year.

High sheep slaughter rates have led to a recent downgrading in forecast wool production for Australia in 2014-15. The Australian Wool Production Forecasting Committee’s second forecast for 2014/15 shorn wool production was 328 million kilograms, down 3.7 percent from 2013-14 levels.

Mr Carmody said there was confidence among Chinese processors for wools suitable for flatbed and circular knitting, rather than for woven fabrics. Processors were also confident current prices for crossbred wool could be maintained. Some companies were looking to expand into circular knitwear for next-to-skin wear.

Mr Carmody said Australian wool growers and the trade knew that seasonal conditions had affected fine wool production, and China has never been the ultimate destination for the finer spinner types.

Chinese want 19-21 micron wool under US1000 cents

Many of the Chinese processors were also saying they would like to maintain rates for bulk commodity wool, 19-21 microns, under the US1000 cents delivered mark.

“Now if the US dollar keeps on going the way it was, the main thinking is the Australian Clean On The Floor-based market won’t have to move to meet their ideal price.”

The heavy fall in the A-US dollar exchange rate of three cents before the conference was spooking Chinese processors, he said.

“It made them jittery thinking it might go another three cents, so let’s wait.”

The Chinese processors were very concerned about the credit crisis in the country, with hints there might be some casualties, he said. Scouring and dying processors were also struggling to meet effluent disposal regulations by 2015 and this was distracting them from buying wool.





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