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China Economy Causes Wool Price Drop

01 September 2015

AUSTRALIA – Australia’s biggest wool customer China has caused market turbulence this week, causing consecutive contractions in wool prices after devaluing its currency.

Prices fell by 40 cents per clean kilo again last week as the wool market responded to global volatility, according to market analysts at Australian Wool Innovation (AWI).

The Eastern Market Indicator closed the week at 1222 ac/clean kilo to end the month.

Next week is expected to see prices hold for the scheduled 42,000 bales on the back of renewed overseas interest, rebounding sentiment in countries affected by recent economic developments, grower resistance to lower prices evidenced by the growing pass in rates and the need of recently absent local buyers now needing to buy give growers optimism to upcoming sales.

AWI analysts said the devaluation of the yuan could assist companies sourcing or manufacturing wool in other Asian countries as lower costs in China are likely to have a domino effect.

In its weekly report, the AWI explained the later part of August has seen the Chinese stock market plummet more than 15 per cent, following the 30 per cent decline in June and July.

“This has prompted a further interest rate cut of 0.25 percentage points and a cut of 0.5 percentage points in the required reserves ratio of large banks,” the report added.

“It is too early to tell if this will help stabilise China’s stock market, or if greater government intervention will be required, through means such as the restriction of stock sales or the suspension of trading.”

TheSheepSite News Desk