Auckland, NZ, Nov. 4--Chinese are buying about half as much wool as they did at this time last year because of the strong rise in the dollar, according to stuff.co.nz.
Changes in demand and structural changes in the global industry--coupled with the sudden rises in Australasian currencies--are posing increasing challenges for the wool industry.
Peter Whiteman, managing director of exporter Masurel Fils, who has just returned from Europe, says some sectors there are in dire shape. Makers of the finest worsted materials are in real trouble, from top makers to weavers.
"There is little demand for their materials. They are being slaughtered in the market by the East Europeans and the Chinese who can produce it much more cheaply."
Whiteman said two or three years ago these people didn't have the technology, and couldn't match the quality of the West Europeans. Since then they had made enormous advances. "While they still can't match the very best of the best, they can compete with the bulk of the European production."
There were also major changes under way in European carpet making. The Europeans can no longer produce carpets economically using the long fleece wools needed for semi-worsted carpets. Carpets in this style are no longer in vogue.
Whiteman said this would have ramifications for New Zealand, which is a major producer of this type of wool.
"However, the Europeans could still make blended woollen carpets from New Zealand's shorter wools extremely efficiently. They remain world leaders re-exporting this type of wall to wall carpet and rugs to the US from the UK, Italy, Belgium and Germany. The outlook for this part of the market is okay."
Whiteman said the demand for longer staple carpet wools was only a problem in Europe. This type of wool was still sought by Nepal, Iran and manufacturers in Australia and New Zealand.
"Thanks to the ongoing housing boom throughout Australasia, mills in this part of the world remained substantial buyers of carpet wools. They are maintaining their buying at levels seen over the past 18 months, and seem to be chugging along nicely."
Of more concern was subdued buying from China. Thanks to the strong rise in the dollar, it is believed the Chinese are buying about half as much as they did at this time last year. The Chinese are finding current New Zealand prices extremely high as their currency is tied to the US dollar which has fallen steeply against both Australian and New Zealand currencies.
Whiteman said the Chinese were going to considerable lengths to find the wool they needed at the lowest possible prices. "They are buying in Spain, in Italy, in the Nordic countries–-just about everywhere. And they are paying 50 cents to a dollar less than they would for New Zealand wool." While it is not the same quality they were managing to blend it to produce hand knitting type yarns they needed.
"The fall in Chinese buying is not at all positive for either Australia or New Zealand. This has nothing to do with quality or relationship issues--it is all to do with price and what they can afford to pay."
However, Whiteman said traders often made too much of currency problems. "It is easy to blame the high dollar. The currency is not helping--but if the Chinese really wanted our products they would pay for them."
However, traders said that the steady rise in the currency against the US was the major reason for the drop in prices seen over the past five weeks. The strong indicator was $4.07 on October 30, down from $4.15 a kg on October 23 and $4.31 the previous month, on September 25. The medium indicator was $5.84 on October 30--compared with $6.49 on September 25.
However, the fine indicator picked up to $10.81 at the sale on October 30, compared with $10.76 the week before. But it had stood at $11.57 this time last month.
