Wool Trade

Queensland Cotton stocks not expected to affect wool prices

Terry Sim, August 29, 2014

wool fibre genericMajor wool exporter Queensland Cotton this week reassured the market its sale of remaining stocks will be orderly and unlikely to impact on current raw wool prices.

Other major exporters said yesterday the current market situation was due to lack of demand and credit restrictions in China, and had not been affected by the recent announcement that Queensland Cotton’s parent company Olam International was withdrawing from wool exporting.

Olam International recently announced it would be withdrawing from wool trading and exporting to concentrate on developing Queensland Cotton’s Western Wool Marketing broking network in Australia.

Queensland Cotton’s general manager of wool Michael Avery yesterday refuted overseas rumours that the company could be holding large wool stocks and that their “sell-off” might harm the Australian market.

“We have not got significant stock.

“Based on our average turnover, we have got a bit over a week’s stock,” he said.

Queensland Cotton was ranked between number two and four among Australian wool exporters in recent years, trading 4-8 per cent of the clip since starting business in 2008 and about 150,000 bales last year.

Mr Avery said he spoke to a couple of colleagues before the recent announcement.

“They made the comment that should we wish to sell any stock locally that they were there to make sure that any rundown we had was orderly and had the least impact on the market as possible.

“That was our intention and we have been doing that for the last little while, since June, and we are now in a position where we have very little stock.”

Mr Avery said he spoke to other major Australian exporters on Thursday to get their input.

“They said that they wouldn’t have thought that what we did would have any influence on the market.

“They feel the malaise in the market at the moment is purely down to credit restrictions in China at the moment and the lack of demand.”

Too much top-making space and insufficient orders were also cited by the exporters as reasons for the market price levels, Mr Avery said.

“We haven’t the stocks to ‘fire-sell’ and our intention from the beginning, right from our head office in Singapore, was not to undertake anything like that.

“We were always looking at running through our commitments to the end of October.”

Rod Franklin, the managing director of Australia’s leading wool exporter, Techwool Trading, said the Olam International’s announcement had nothing to do with the fall of the Australian market in recent weeks.

Mr Franklin said a rumour in China that Queensland Cotton had “quite a bit” of wool had been quelled.

“I would be speaking to Chinese traders and agents probably 20 times in a day and I can say that this fall now has absolutely nothing to do with Queensland Cotton’s stock position.

“This market fall is due more to the financial situation of a few of the textile mills and traders in China – finance is getting harder and harder to obtain from the banks in China,” he said.

“I think that is the major reason for the drop – there is just that bit less competition against the medium and smaller size mills and a lot of confidence has gone.

“I’m 100 per cent certain that Queensland Cotton’s disposal of stock would not make one iota difference to the market,” he said.

“The longer the disposal of stock of course, the better it will be.”

Fremantle wool exporter Peter Morris, managing director of PJ Morris Wool, said the Olam International announcement had no impact on the Australian market.

“It was just one of those weeks when there was a bit of a dip.

“It did not panic any of our clients, it did not panic anybody in Australia.”

Mr Morris said Queensland Cotton had not been a major buyer over the last six months and the rumours of the company’s wool stocks was “idle gossip”.

“They have done nothing to impact the market.”

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