Short-term forecast firm for better fleece

Press, 10 February 1986, Page 13

Short-term forecast firm for better fleece

PA Wellington Prices for sound fleece of good colour are likely to be firm at auction sales during the next few weeks, says the Council of Wool Exporters in its wool sale preview. While there is much uncertainty about likely demand later in the year, exporters are competing strongly to buy good wool for immediate shipment, it says. This competition was strong enough to maintain prices (in N.Z. cents) at Friday’s Napier sale, in spite of an increase in the value of the New Zealand dollar against both the United States and Australian currencies. Mr Don. Quested, of Hart Wool (N.Z.), Ltd, says these currency movements have again made New Zealand wool expensive for overseas customers. However, most auction purchases being made are to fill contracts entered into by New Zealand exporters with overseas customers some weeks ago when the dollar was more realistically priced, he says. The greatly reduced wool clip is adding to industry uncertainty and tending to bolster prices at auction. For Friday’s wool sale in Christchurch, for instance, the rostered offering will be down from 30,000 bales to 15,000 bales. “After handling huge quantities of wool during January, it appears that supply is starting to run out," said Mr Graeme Martin, of G. Modiano N.Z., Ltd, a Napier wool export house. “We may not see any quantity coming up for auction until second-shear wool comes through in April.” On the international front, demand patterns six months out are far from clear, according to Mr Bill Carter, executive manager of the exporters’ council. Mr Carter, who returned last week from a

meeting of the International Wool Textile Organisation in Paris, said all countries except the United States and Japan reported satisfactory but below peak levels of activity.

"Order books are generally reasonable out three months, but beyond that there is a big question mark. For the last year to two, exporters and manufacturers have generally enjoyed having fairly full order books out to six or eight months ahead. “There is no indication of a significant downturn in world economic activity, but there is no indication of any increase,” he said.

“Everyone in the industry is watching Europe to see what happens. It is the centre of the fashion world and is the destination of 40 per cent of New Zealand wool.” World economic and currency trends were a main reason for the uncertainty in the textile trade, said Mr Carter. He put little weight on the effects of a recent decline in world oil prices. "The day is now past when a fall in the price of oil inevitably meant a fall in the price of synthetics.

The price of oil now represents a much smaller proportion of the trade price of the fibre than it once did. “In fact, the fall in price of oil is something of a double-edged sword for wool. While it may tend to push all fibre prices down, it also gives a breathing space for some countries which normally spend most of their foreign exchange on oil.

“Greece, for instance, normally spends more on oil than its entire export income. A decline in oil prices puts them in a better position to release foreign exchange for wool purchases.” Two negative influences on present world wool demand are Japan and the United States, says Mr Carter.

In Japan the textile industry as a whole had decided to rationalise its production and to reduce its large stock holdings. As a result, purchases of wool from both New Zealand and Australia are down 50 per cent this season.

In the United States garment manufacture had declined substantially in recent years. Many garments and textiles used in

garment manufacture are being imported from Third World countries. United States manufacturers have, however, shifted to some extent into the manufacture of high quality specialist carpets, creating a new market for New Zealand crossbred, raw, scoured and yarns. A big new potential market for New Zealand wool is Turkey, says Mr Carter.

“The expansion of its textile industry in recent years has been remarkable. In fact, it may soon have the potential to purchase as much wool from New Zealand as Greece and Iran combined,” he said.

Turkey had had a checkered history as a market for wool. However, there was a tremendous reservoir of good will among wool exporters. “About six years ago, Turkish importers were forced by Government to renege on a number of contracts. But to their credit, the importing companies have since paid all their bills, plus interest,” he said. Mr Carter said Australian and New Zealand exporters had been active in Turkey in recent months.