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China impacted by high wool prices
20
Jun '11
The woolen industry in Western Australia (WA) is passing through a critical phase due to the rising prices of Australian wool. In the last few months, the prices have risen so sharply, that it is becoming difficult to sell the end-products - clothing, according to Chinese buyers of Australian wool.

A small group from China that visited WA to assess the state of its woolen industry first-hand said, “Chinese firms are already selling at a minimal profit. Hence, if they procure WA wool at today's market prices and subsequently if there is a drastic drop in prices, then several manufacturing units in China would have to be closed as the unit owners would not be able to bear such a loss.”

The Chinese group, which included two Chinese mill owners and a fabric maker, termed the present price situation as dangerous. While the problem has been there for the past two years, it is only now that it is becoming more evident. The scarcity of wool is actually, now becoming very apparent, according to this group.

The group was surprised to find that owners of sheep farms like Oakover Merino are no longer withholding wool for five or more years before they sell, as they used to do earlier.
It was also found by the group that the WA shepherds are no longer increasing their sheep flock numbers due to variations in seasonal demand for wool and price constraints.

The group felt that the severity of the problem of the shortage of wool and the associated high prices is yet to be fully felt in China. It may take some more time to feel the effects of the short supply of wool, according to Mal Edinger, Director, Westcoast Wools.

At present, Chinese companies have enough stock to sell as they are mixing their old stock with the new one. In fact, the entire process chain from procuring of greasy wool to manufacturing of garments takes around eight to ten months. So, the shortage of supply in wool is not immediately felt by the end-product sellers.

The Chinese clothing makers, however, are now beginning to realize the need to refine their markets as well as the importance of branding their products. Hence, they are now developing their own branding, while aiming at the high-end markets.

In other words, the Chinese have found a way to deal with the sharp price rise, i.e. by branding their goods and selling in high-end markets. So, the price does not matter for the Chinese as long as they can sell the products for profits.

Fibre2fashion News Desk - India

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