Fed: World economic downturn to hit Oz wool prices/demand

AAP General News (Australia)
12-03-2001
Fed: World economic downturn to hit Oz wool prices/demand

CANBERRA, Dec 3 AAP - The world economic downturn is hitting the wool market with prices
expected to fall for the next six months, Australia's chief wool forecaster warned today.

Australian Wool Innovation (AWI), in its last monthly analysis for the year, said the
sharp fall in wool prices in recent months was set to continue.

It said world demand for wool was falling, and only a global economic improvement late
next year would bring relief to Australian wool producers.

Wool prices have dropped below the 700 cents a kilogram mark in recent weeks in line
with concerns over global economic conditions.

AWI said global retail demand for fine wool would be down five per cent this year and
remain low for the next six months.

This would flow on to prices which would be unlikely to improve until at least July next year.

"Demand looks set to remain weak over the next six months," it said.

"On past price cycle patterns, this downturn may turn around from the middle of 2002,
although this is highly dependent on developments in the global economy."

AWI said global supply was expected to be down as much as seven per cent, brought on
by production cuts and the end to Australia's wool stockpile.

It said the supply concerns would go some way to propping up prices, particularly in
the coarser wool categories.

The organisation did hold out hope for producers of fine wools, saying that despite
a sharp drop in this sector there appeared to be good long-term conditions.

"While fine wool is feeling the chill of the current economic downturn, the long-term
prospects for fine wool remain solid," it said.

AWI warned that any further appreciation in the value of the Australian dollar would
undermine prices and hit demand from the important Chinese market.

AAP sw/ph/sb d

KEYWORD: WOOL

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