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Beyond the Bale : December 2017
According to Chinese Customs, China imported 192 million clean kgs equivalents of raw wool from January to September 2017 from all origins, 2% more than during the same period of 2016. However, almost all Chinese customers feel there is not enough wool around. “Where has the wool gone?” they ask. Most China top making mills are in a hand-to- mouth state since the beginning of the season. They have been afraid of price drops, thus they hadn’t bought any extra stocks. Meanwhile, the traders have been quiet as they can see no profit margin in booking in US Dollars and then selling in RMB (Renminbi or Chinese Yuan CNY) after arrival of the wool in China. The current situation sees China maintaining very low stocks of greasy wool, wool tops and yarns. The majority of wool processors were expecting the wool prices to drop, but the reality is the Merino prices are going higher and higher, no matter whether it’s fleece, skirtings, cardings or dags! Everyone is bewildered why the prices are ever climbing up. The mill owners dislike the prices, but they cannot wait forever. They have to buy to keep their very expensive machines running. As one mill owner said: “When you drive a car, you have to buy gas no matter how expensive it is.” Why do the wool prices stay high? My personal reading is that apart from the usual regular demand, we have seen two top selling and recently new fabrics of double face and less popular wool fake fur. Both of these two types consume large amount of wool compared to the traditional woollen fabrics. The unusual fake fur demand has really made the traditional wool users confused. When demand pushed the prices up, they were surprised. When the demand cooled off a bit and the price started to drop, they were lost as to what should be the right point to then buy. I have a number of Chinese buying customers who tried to predict the market but turned out to be wrong. From September to October 2017, they kept telling me that 19.5 micron and broader Merino had to come back in price. Some even sold the wool tops before booking the greasy, hoping to buy at a more favourable and profitable price level. Now they are very disappointed, and obviously out of pocket, by the price rises. The longer they wait, the higher the prices have gone. With not much time left before Christmas break, they will eventually have no other choice but to buy. The increasing capacity of top making and good demand for China-based wool agent Lizzy Shen provides in this article, written especially for Beyond the Bale, her insights into the rising wool prices and low stocks of wool at Chinese processors. AN INSIDER’S VIEW ON CHINA China-based wool agent Lizzy Shen wool in China are a convincing support for the wool prices to stay in the high territory. Based on all above facts, I am optimistic about the wool prices in the next three months. After that, it is too far to see. China import figures supplied by Nanjing Wool Market for the period January to August 2017 (below), show that Australian wool comprises 68% of the volume of greasy wool imports, but more importantly 79% AUSTRALIA LEADS GREASY WOOL IMPORTS INTO CHINA Volume (kg) Value (US$) US$/kg Australia 122,843,314 1,312,881,300 $10.69 Argentina 3,719,935 38,771,613 $10.42 Lesotho 1,553,956 15,977,368 $10.28 South Africa 13,592,969 136,767,474 $10.06 USA 1,261,036 9,570,049 $7.59 Uruguay 3,056,854 22,014,680 $7.20 Chile 1,669,311 10,818,175 $6.48 Spain 3,412,150 17,916,130 $5.25 New Zealand 13,621,069 60,762,322 $4.46 Canada 70,471 291,331 $4.13 Hungary 769,791 2,761,554 $3.59 Belgium 1,509,893 5,158,416 $3.42 France 1,260,229 3,817,780 $3.03 Netherlands 588,838 1,763,332 $2.99 Germany 811,211 2,127,933 $2.62 Italy 725,508 1,744,036 $2.40 UK 3,690,825 8,405,316 $2.28 Ireland 281,716 611,255 $2.17 Kyrghyzstan 203,034 182,730 $0.90 Kazakhstan 2,504,620 2,050,512 $0.82 of the value. Not only is Australia dominant in terms of the amount (kg and $) imported into China, but Australia also leads the world for the average US$ per kg paid for the importation of raw wool into China. IMPORTATION OF WOOL INTO CHINA 64 MARKET INTELLIGENCE