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REUTERS
Sydney, Sept 15: Australia's fine wool industry, already reeling from a demand slump in Asian markets, faced even tougher Times in 1998/99 ending June, a leading industry body said on Tuesday.
The downturn in Japan and South Korea in particular was negative for fine wool demand prospects, Woolmark Co, formerly known as the International Wool Secretariat, said in its annual review of the prospects for wool of 19.5 micron and finer.
"This will keep pressure on auction prices for fine wool well into the 1998/99 season," it said. Production, sales and prices all declined in 1997/98 in the wool industry and are forecast to continue to decline in the current year.
Woolmark estimates that Australian wool production decreased by three per cent in 1997/98, while total auction offerings fell by five per cent, mainly because of the Asian Financial crisis.
Total Australian wool exports decreased by 10 per cent in volume terms in 1997/98 compared with 1996/97 but fine wool exports fell by only three per cent inthe same period to 110.9 million kg.
Fine wool exports to Italy, Australia's most important market for this grade, increased by nine per cent in 1997/98.
However, fine wool exports to China declined by 18 per cent.
"A slowing economy, declining demand from Japan, its major wool product export market, and restructuring in the Chinese textile industry all contributed to lower demand in 1997/98."
"A deepening recession in Japan in 1997/98 led to a significant fall in raw wool demand from that country," it said. Total Australian wool exports to Japan decreased by 29 per cent in 1997/98, although fine wool exports declined by only seven per cent over the same time period, it said.
South Korea purchased 47 per cent less wool of 19.5 micron and finer (greasy equivalent) in 1997/98, it said.
"Retail demand conditions in most major markets deteriorated in the first half of 1998 (on) fallout from the Asian financial crisis negatively affected global market sentiment," it said.
"Retail and pipeline demandfor wool from the Asia region, which accounted for 50 per cent of Australian wool exports in 1997/98 and 44 per cent of retail consumption of Australian wool on average over the last three years, contracted sharply."
Wool consumption in Italy was expected to fall again in 1998 as low consumer confidence and a trend to casual and sportswear were detrimental to the sale of wool apparel, it said.
China's economy continued to slow, subduing demand for fine wool, it said. Expected subdued wool prices, particularly in renminbi terms in 1998/99, should help support raw wool purchases to some extent.
"However, there is a risk that China may devalue its currency in 1998/99 as their competitive advantage in low-cost manufacturing in the Asian region has been eroded due to the currency devaluations of other countries in the region."
Retail conditions in Japan, the largest market for finished superfine wool products, deteriorated rapidly as the economy moved into recession early in 1998, it said.
"Woolconsumption will remain under pressure in 1998 as unemployment is projected to rise further and no improvement in the economy is expected for the rest of the year," it said.
In Korea, rising unemployment and falling income is expected to lead to another fall in wool consumption in 1998.
Australian wool production was expected to fall again in 1998/99, but the supply of 19.5 micron and finer wool was likely to be maintained at or slightly above current levels, it said.
Further weakness in prices were expected in the first half of the 1998/99 season but demand for fine wool was expected to start to rise toward the end of the season, it said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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