CONCERNS wool might be included in mooted commodity import suspensions by China from today or in the future have highlighted a need for Australia to diversify its market and manufacturing base, according to a grower group.
Industry-wide enquiries by Sheep Central today indicate that wool – because of Australia’s supply prominence and its importance to China’s manufacturing industry — is unlikely to be on any list of Australian commodities to suffer import restrictions into China from today.
However, Australian Wool Growers Association director Robert Ingram believes the possibility of wool being included in any Chinese import suspensions showed how vulnerable Australia’s industry is, “in the context of the dominance of one buyer in the market.”
“The industry really needs to come together very very quickly, and this is what AWGA is currently working with various parties to do, to bring together the exports, processors, the brokers, growers and Chinese market experts.
“We need really need to look at significant strategic change to our marketing strategies now,” he said.
This could include ramping up central Asian markets, the European markets, India, Vietnam, Cambodia and Indonesia, he said.
Mr Ingram said a new Australian market diversity strategy would also need to look at bringing processing back on shore and subsidising domestic processors.
Exporters say Australian wool is unlikely to be affected
Sheep Central has spoken to several Australian wool industry people who listened to an online briefing by Dean Merrilees, Minister Counsellor (Agriculture) from the Australian Embassy in Beijing that referred to a rumoured list of commodities to be most-affected, including wool, wood, coffee, coal, lobster, wine and sugar. The webinar participants said they were told Chinese importers are being encouraged to not buy these commodities from Australia after 6 November.
However, National Council of Wool Brokers of Australia president Rowan Woods said he had spoken to several leading exporters who did not think wool would be affected at this stage.
“So, to the best of my knowledge, wool is not yet on any list of exclusion.
“What supports my feeling about that is the China has such a massive wool industry and for them to keep supplying that industry, there is only one source of in the world that can supply that volume, and that’s us.”
However, Mr Woods said the industry should not rest on its laurels.
“You would be naïve to not expect something out of left field, but at this stage it is full steam ahead.”
Techwool Trading export trade manager Evan Croake said all the information the company — Australia’s biggest wool exporter – has received from Chinese sources, indicated that wool is excluded from the list of potential banned or boycotted products.
“The reason being, I think wool is in a bit a special category, purely because it is very hard for Chinese mills to replicate or substitute Australian wool from other origins.
“At this stage, wool looks like it is unlikely to be affected,” he said.
“But obviously we just have to be conscious that if there is an escalation in the trade difficulties between Australia and China, there is always a possibility wool may be impacted, but at this stage it looks very unlikely.”
University of Queensland lecturer and Australia-Asia agricultural trade expert Dr Scott Waldron said he has seen a list from a government source advising Chinese companies not to import certain commodities from Australia into China after today, “otherwise they would be stopped”. The list included barley, sugar, red wine, timber, coal, lobster, copper ore, refined minerals, but not wool.
“I looked at some of the language in it and it looked pretty informal.
“The problem is that the Chinese Government hasn’t formally denied it, so they’ve allowed these rumours to get around and that does damage in itself,” he said.
“I don’t know how legit the list is.”
Dr Waldron said China targets particular industries for particular reasons.
“And one of the factors is that it can hurt Australia, it imposes costs in Australia and that increases the leverage and so it has really targeted four of the top five ag exports – barley, beef, wine and cotton.
“But wool hasn’t been targeted and that’s by far the biggest agricultural export item (into China,” he said.
So you have got wonder why they’ve targeted the big four and they are working their way down the list, but they’ve left the biggest one up at the top of the list.
“You would think if they really wanted to hurt Australia and make us charnge our foreign policy that they would pick wool.
“But the other side of the equation is that they don’t want to shoot themselves in the foot – they don’t want to impose really high cost up[on themselves.
Dr Waldron said putting a big barrier against Australian wool would really hurt China, because 80-90 percent of their fine wool comes Australia.
“If they were to cut off that trade all of their worsted style mills would be out of business – they would get through their stocks and that would be it.”
Department has no confirmation on wool list inclusion
The Department of Agriculture, Water and the Environment today issued a response to media questions on the rumoured Chinese import actions through an export Industry Advice Notice:
China trade: The department will continue to provide certification for goods that meet the requirements of the Export Control Act. Exporters/export registered establishments are advised that some recent shipments have been delayed on entry into China, leading to commercial losses. While the department will continue to facilitate market access and seek to ensure importing country requirements are up to date and accurate, the department encourages exporters to fully consider their own risk and potential losses. Exporters should ensure that they have independently confirmed relevant importing country requirements. Exporters are urged to seek advice from importers on potential for disruption to the clearance of their shipment.
The department said it is aware of media reports that wool is on a list of potentially suspended products for import into China, though it has not received any confirmation from authorities about this list.
AWI is confident of relationship with China
Australian Wool Innovation chief executive officer Stuart McCullough said he seriously hoped that wool isn’t on a list of Australian commodities to be targeted with import suspensions.
“We are confident that with 50 years of Australian wool trade into China an indication that our relationship is strong.
“AWI continues to work closely with our industry partners in China to maintain our good footing there,” he said.
“It is worth noting that there are things that are in our control and the industry to industry relationship is well within our control and government to government relationships are not within our control, so we can only affect change on the things that we have some say in,” he said.
Mr McCullough said AWI has had an emerging market strategy for more than a decade.
“We have extended wool’s manufacture and use in places including Vietnam, Cambodia and Bangladesh as well as other traditional markets such as Western Europe, the UK and the United States.
“But the fact remains China is our biggest customer for many reasons including its size, climate and growing affluence,” he said.
“They’re a very unique partner from a manufacturing point of view, but also from a consumption point of view as they are now consuming half of the Australian wool clip they buy domestically.
“In terms of major economies to recover from the disruption due to COVID-19 China is the clubhouse leader, by a long way at the moment, and so in April we started working on a marketing strategy as we felt that they would be the first to come out of this. It is the only major economy that is growing,” he said.
“It has bounced back from the COVID disruption with a V-curve.
“South Korea looks promising so we are doing some test marketing there right now, Japan looks good too and it is a tailored textile market which suits our product so we are also doing some test marketing there,” Mr McCullough said.
“So that’s how we are deploying our marketing strategies at the moment. Germany seems to be doing better than other parts of Europe so that might be a good market in the shorter term.
“We are particularly concerned about Italy, particularly concerned about France, the UK and the United States they are big, important customers to us,” he said.