Wool Industry Seeks Clarity on China’s Wool Quota

It has recently come to the attention of the global wool industry that the Chinese Ministry of Finance & Commerce (MOFCOM) has suspended the processing of applications by Chinese importers and mills for the global quota (licenses to import wool) as at 17 July 2007. The current global quota is 287mkg for greasy wool and 80mkg for wool tops.

The President of the peak grower body WoolProducers Australia (WPA) Robert Pietsch has urged wool growers not to overreact to this news, but to take a long term view of the market for wool while every effort is made to address this impasse.

“The Australian industry, through WPA and the Australian Wool Industry Free Trade Committee, has responded to this news concerning the quota by engaging with other stakeholders to address this issue and the potential for harm that it has to the global wool industry,” said Mr Pietsch.

“As this issue of quota allocation has become more significant, the industry has likewise escalated our activities in response. The respective Ministers for Trade and Agriculture have been briefed by WPA and the Trade Committee, and the appropriate communications are taking place at ministerial, departmental and diplomatic levels.”

“There is also a strong multi-lateral approach in place with New Zealand, South Africa, the United Kingdom and Uruguay all giving their support to addressing the matter.”

Mr Pietsch stressed that the decision does not mean a cessation in wool buying activities by Chinese companies, although growers must be conscious of the possible impacts in the very short term.

“There are unfilled contracts for which wool has yet to be purchased and also there are also companies in the Free Trade Zone that can import wool for processing and re-export, without the allocation of quota,” said Mr Pietsch. “Then there are our other customers such as Italy, India, Taiwan and the Czech Republic as well as Australia’s eight scouring mills and top-making plants.”

“The key message is that the market for wool will continue, albeit with less immediate involvement from a very large customer, and what the impact of that will be over coming weeks is still unknown.”

In regards to the possible action for growers as a result of this news, Mr Pietsch said that the best course of action is to be well informed.

“It is important that growers who are considering selling wool in the short term keep themselves up to date as possible on developments and longer term market information.”

“The wool production forecasting committee has predicted that only 410 million kilograms will be produced in this financial year, and with demand signals remaining strong from the northern hemisphere there is still good reason for optimism from growers at the medium to long term strength of the market.”

“Whilst 140mkg of wool had been imported into China by the end of May, which was 23% higher than the previous year, there is still around 150mkg that can still be bought.”

“As the market reopens there should be no need for rash decisions from sellers.”

“As always, when marketing their clip, growers should avail themselves of the facts, and are advised discuss all factors such as the value of the dollar, future production forecasts and trading conditions with our international customers, with their broker.”

IWTO will closely follow up the situation and will report to you in case of any news.