NZ wool exports jump to the highest in more than a decade in June, helped by low kiwi, Chinese demand

Tuesday 4th August 2015

New Zealand wool exports jumped to their highest level in more than a decade in June, aided by a lower currency and strong demand from China, the nation's largest market.

Wool exports rose 19 percent to $75 million in June from the same month a year earlier and reaching the highest level for a June month since 1994, according to Statistics New Zealand data. Exports to China, which account for two thirds of the total, jumped 34 percent to $50 million.

"The main driver of the increase in value is the weakened New Zealand dollar," said Georgia Twomey, a commodity analyst at Rabobank. The New Zealand dollar averaged 71 US cents through May and June of this year, down from about 86 cents in the same period last year, she said. It recently traded at 65.60 US cents.

"That depreciation really improved the value of exports in local currency terms," she said. "One of wool's major challenges is that it is a lot more expensive than synthetic or cotton alternatives, so the weaker dollar helps to maintain US dollar term prices and improves returns for growers."

The decline in the value of the currency helped make the nation's wool more attractive for Chinese buyers, who tend to trade in US dollars, she said.

"Local producers are getting a better return and the prices in US dollar terms for the Chinese mills are looking fairly healthy as well," she said.

China has also been importing more wool as it seeks to bolster supplies of the fibre into its processing and manufacturing facilities, which had become depleted, Twomey said.

In the second quarter, there was strong demand from Chinese buyers for 24 to 32 micron wool, to meet manufacturing deadlines for knits and overcoats for the upcoming northern hemisphere winter, she said.

With little prospect of increased wool supply from major producing countries as their sheep numbers decline, future demand is dependent on the global macroeconomic outlook and the confidence of consumers in major markets such as the US, Europe and the UK, she said.

New Zealand is the world's largest exporter of crossbred wool and the fibre is the nation's 13th largest commodity export.

BusinessDesk.co.nz

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