Wool slides 7pc as China issue bites

WOOL prices dipped seven per cent this week in a rude shock for growers.A dip in the Australian dollar slightly softened the blow of the “China issue” when the wool market re-opened after a three-week break but prices still fell 60 to 80 cents at Tuesday’s Sydney sale.The northern market indicator lost 71c to finish the day at 885c a kilogram clean, with 30 per cent of the 8500 bale offering passed in.Heavy falls were seen across the board with the 18 micron indicator falling 68c to 1159c/kg, the 19 down 70c to 1037c/kg, the 21 fell 59c to 905c/kg and the 23 micron indicator lost 67c to 843c/kg clean.Associated Wool Exporters wool buyer Scott Carmody put the sharp fall down to a number of factors, but said the big unknown was always going to be what the Chinese reaction was after a suspension of wool import quota applications until September.“It was a double whammy as the quality of wool wasn’t there and the Chinese were not as active in the market as they normally are,” Mr Carmody said.“Thank God the Australian dollar lost a few cents as it could have easily fallen further.”The Australian dollar was trading at about US86c for much of the day, US2c lower than last week’s highs of US88c.Associated Wool Exporters is linked to two mills in China, but as it imports and exports from the country it does not come under the quota.Mr Carmody said the recent fall meant the market was approaching the level where manufacturers could also make money from wool.“The price is now coming back to where product can be made at a profit,” he said.“Our company is 100pc manufacturing in China now and I can tell you our ideal price is about 30pc under this market. “Where the market finished before the three-week break it was almost impossible to sell a kilogram of processed wool, whether it be yarn, greasy wool, tops, whatever. “The July-June prices did not allow us to find any new business at all – we have been burnt like we haven’t been burnt for 10 years over the last six months.”It is for this reason that Mr Carmody sees the possibility of the market falling a little further and although wool growers will be unhappy with the prediction, he stresses that wool buyers buy in US dollar terms, so the exchange rate is a significant factor.“I have been told that the Chinese are looking for a market that is about 30c lower than where it finished today.”This would mean the Chinese buyers Mr Carmody talks of are seeking an eastern market indicator of about 870c/kg clean.