A significant amount of wool was destroyed and a major buyer was absent from the Australian market after a serious fire was reported at one of the largest wool processing facilities in China, preventing their normal operations.
Anecdotal reports coming from the wool industry suggested 800 tonnes of greasy and 700 tonnes of processed wool had been destroyed, roughly amounting to $40 to $45 million.
Nutrien Ag Solutions south east wool broker David Hart said the amount is not insignificant.
"That 700 tonnes of processed wool would be the equivalent of about 1000 tonnes greasy wool, which adds up to about 13,000 greasy bales of wool," Mr Hart said.
"What effect it will have on the short to medium-term, who knows, but at some point you would think that wool would have to be replaced, and how long that would take to do so is unknown at the moment."
Australian Community Media understands the fire occurred at the Zhejiang Redsun Wool Textile Company's complex in the Zhejiang Province.
Trading under the name "Sequoia" they are a significant force in the market, consistently a major buyer in auction rooms.
"The fire wasn't in their mill and no plant has been damaged, so their processing capacity remains unchanged," Mr Hart said.
"But obviously it was a catastrophic event which simply took up all of their attention.
"With them out of the market it contributed to the substantial fall and murky finish to the selling season and we are likely to see the impact of going into the new selling year."
Combined with the fire removing a significant player, the highest offering in over a month, and three weeks of solid rises, wool prices fell sharply along with high pass-in rates with one in five bales passed-in.
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The Eastern Market Indicator (EMI) lost 44 cents or 3 per cent, dropping to 1430c/kg after only reaching its highest level in three years.
With 110,000 bales rostered for sale over the next two weeks, the impact will be felt if Sequoia remain out of the market.
"Whether or not they are back in the market this week we are waiting with bated breath, we should find out more on Tuesday when the sales resume again," Mr Hart said.
"However, there is no expectation that they will be out for very long, but for how long we just don't know.
"But when that amount of wool disappears from the market, it will need to be replaced, so medium to longer-term it won't be a bad thing - it will create a bit of a short-term spike in demand for those types."
Mr Hart said the question now is will trade be able to absorb the larger offerings moving forward.
"I don't think there is any doubt the pass-in rate will rise," he said.
"Even though there is in order of 110 000 bales rostered before the recess, at the end of the day we may only sell 80,000.
"The other question is, will there be sufficient financial resources within the trade to deal with these big offerings?"
An 11-week turn-around is estimated between purchase and payment, which is still related to shipping delays and letters of credit.
And according to AWI reports las t week, some shipping logistical issues also delayed buyers' funds.
Delays and cancellations of vessels saw some buyers funds being delayed by 10 days or more than what was originally accounted for.
"It is a big hump to get over the next two weeks," Mr Hart said.
