China growth slide drags prices

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Bob GarnantThe West Australian
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China's slowdown in economic growth was blamed for the Australian wool market's fifth consecutive fall when the Eastern Market Indicator finished at 993c/kg last week.

National Council of Wool Selling Brokers executive director Chris Wilcox said it was the first time the EMI fell below 1000c/kg since May last year.

"The decline comes amid gloomy reports out of China, due to the tightening of credit availability in China," he said.

Mr Wilcox said China's economic growth rate was only 7.7 per cent in 2013, well down on the 10 per cent annual growth China recorded in the 1990s and 2000s.

"Both factors are hurting consumer confidence and spending," he said.

Mr Wilcox said it exemplified the latest clothing retail sales data out of China for the January-February period in the top 100 department stores.

"The value of clothing retail sales in that period fell by 1.3 per cent compared with the same period in 2013," he said.

"This comes after clothing retail sales grew by only 5.2 per cent in 2013, which is well below the 13 per cent growth in 2012 and 20-plus per cent growth of 2012."

Mr Wilcox said the Australian wool exports statistics, released this week, showed a 16 per cent year-on-year drop in export volumes for March because of a 24 per cent fall in exports to China.

On a more positive note, the Elders International Wool Report stated last week's wool market recovered on Thursday with solid rises in the superfine categories.

"As anticipated the Chinese Government has reacted to their slowing economy with some stimulus measures," an Elders spokesman said.

"The Chinese Government announced further programs to build low-cost housing, roll out railway construction and small business tax breaks."

He said there were no direct measures announced for the textile industry from Beijing.

"However, given that there are circa 36 million people employed in textiles in China, it would be closely watched by those charged with pulling the economic levers in China," the spokesman said.

"Increasing consumer confidence across China is paramount and the signals provided from Premier Li Keqiang have taken a step in the right direction.

The spokesman said prices for wooltops and yarn in China increased, and greasy wool trading volume picked up.

"This has stopped the slide in wool prices," he said.

The spokesman said with continued economic recovery around the globe the wool market outlook remained positive, with higher volumes in some markets.

"Markets such as Korea are turning over larger volumes with most spinning factories now running on full production," he said.

"Prices remain tight with very low margins for processors but at least volumes have increased.

"The signs are becoming more positive from many markets across the globe as a new generation of consumers become educated about the positive attributes of wool.

The spokesman said clean, green, sustainable products attracted a price premium.

"Unfortunately wool will never be fast fashion as it will always be a relatively expensive product," he said

The spokesman said a long supply chain, high production and processing costs, meant the price volatility would remain.

"The use of forward contracts and options provides a tool in which Australian growers are able to lock in a minimum price yet still participate in a rally."

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