Wool prices stay firm because of strong dollar

Press, 2 December 1987, Page 34

Wool prices stay firm because of strong dollar

PA Wellington Once again, a firming Kiwi dollar has impinged on the wool market, stopping new business in its tracks. In a wool market preview, the New Zealand Council of Wool exporters says prices have stayed firm at recent auctions because exporters have been covering contracts negotiated at lower dollar rates.

But prices for offerings at December auctions are expected to ease in line with the strengthening of the Kiwi dollar. “As the forward contracts which were written before November 16 — when the dollar began to firm — are settled, prices will ease back to what the world can stand,” said Mr Don Quested, managing director of Hart Wool (NZ), Ltd, Christchurch. Another bearish influence on the wool market

was the increasing use of substitutes — either synthetics or natural fibres from other origins — for local wools, particularly those of poorer style. Mr Quested said there should be no doubt about the strong world demand for better style crossbred wools. Prices for these had been remarkably stable in overseas currency terms and were likely to remain so for the rest of the season. “But during the last few months a picture has been emerging of increasing substitution of New Zealand wool in almost all end uses. “One of our marketing staff has just returned from Asia. One of our major customers there has reduced the compo- . nent of 33 micron wool in his blends from 30 per cent to 15 per cent in order to stay competitive. This is not an isolated case,” Mr Quested said. Mr Patrick Desborinets, managing director of Dewavrin Segard, Wellington, said New Zealand crossbred wool prices in recent seasons had become underpinned by a steady demand from the Soviet Union and China. With a declining wool clip, prices for local wool were increasingly independent of demand factors in Europe which had traditionally set the wool price. As a result, European wool merchants are now offering a range of wools from different origins

when they solicit sales from client mills. Locab exporters were doing the J same to remain competi-' tive. ' “Their samples of crossbred wools may have, once been virtually exclu-' sively New Zealand wools.' Now they offer half ai dozen New Zealand types' for a particular end use,, plus a dozen or so of wools from all over-—; Spain, Ireland, Russia,Rumania, France, England — you name it,” MrDesbohnets said. I Mr Quested said New Zealand crossbred wools had a strong reputation for good length, strength and colour and were in keen demand for use in blends with inferior wools. But unfortunately not all local crossbred wools had these qualities and he was concerned there might be little demand for the poorer end of the clip at anything like present prices. These wools of poorer colour, length and strength tend to dominate the auction offerings during late January and February. "There is strong interest in New Zealand crossbred wool from almost all markets but because of price, sales are very much hand-to-mouth at present. “In the Eastern bloc, demand is limited by currency restrictions, in the West by a great caution — the result of currency instability and the unknown after-effects of the sharemarket crash.”