7 Dec 2016

China's market for NZ wool quietens

5:56 pm on 7 December 2016

The Chinese have disappeared from the wool market, leaving producers and companies worried about sinking prices, a broker says.

Fadge of wool

A fadge of wool (file): Prices were now about $3.95/kg for clean wool, East Coast Wools manager Peter Tate said. Photo: RNZ/Susan Murray

Peter Tate, who is a wool manager for East Coast Wools, said the bulk of the wool produced was coarse crossbred wool, and prices were now about $3.95 a kilogram for clean wool, compared to September last year when it was reaching $6.91/kg.

Mr Tate was the chief executive of Fred Tate Wools in Gisborne, which recently merged with Gisborne Wools to become East Coast Wools.

He said China, which takes 60 percent of New Zealand's wool, had gone quiet.

"It's a bit of a shock to us all and everyone in the industry is really worried. It will come back eventually - all commodities go in cycles."

Sheep farmers were feeling disheartened, he said.

"We were all pretty hopeful with the prices we received last year, and this is pretty disappointing for everyone. It's something that plays on your mind right through the holiday period, hoping that you get back in the New Year and things are looking better."

The next two months were the busiest time of year for the market, and Mr Tate said it could be difficult for farmers to know what to do.

"The choice of holding on to your wool is OK, but then you don't want to be building up a huge stockpile that's going to hang over the market for a long time - it's a matter of picking what you sell.

"There are types that are selling, it's important to move them on and hopefully wait for things to improve... until China comes back, it's really looking pretty tough."

He said some wool types were struggling more than others.

"It's the inferior wools that have really been hit hard and at the moment are virtually unsellable. It's probably as low as we've ever seen."

The demand from China had disappeared, exposing the dependency on that market, Mr Tate said.

"We've neglected some of our other markets that take a lot of these wools, we've sort of lost them along the way.

"It's a pretty sad situation, they [farmers] have a lot of wool and wouldn't be covering the cost of harvesting. Until China decides that they want more of our wool it's going to be hard work."

Mr Tate said he had heard China had a lot of manufactured product in stock rather than raw wool, and that would have to shift for demand to pick up again.

Get the RNZ app

for ad-free news and current affairs