Wool exporters worried despite lengthy yarn on contracts

CHINESE Government assurances that it will press state companies to clear their Australian wool debts may help prevent Australia-China wool contracts disintegrating into ''the law of the jungle'', Australia's peak wool exporting body says.

Mr Don Booth, president of the Australian Council of Wool Exporters, said the value of contracts dishonoured by Chinese importers and woollen mills was between A$30 million (about HK$166 million) and A$40 million.

That debt was making buyers wary of buying against extra orders from China, despite the major difficulties now faced by the Australian wool industry.

The Australian wool price is at its lowest in real terms for 50 years, falling below 400 cents last week - less than half than during the boom of the 1980s.

That fall in price since many of the Chinese contracts were signed, plus the devaluations of the Chinese currency are behind the Chinese companies' dishonouring of their contracts.

''They are dishonouring them in several ways; some have refused to make payments as they have fallen due while others have said they would not make payments unless there was a drop in price,'' Mr Booth said.

''Neither of their excuses in international trading terms are in any way acceptable.'' ''Markets continually move and if you are only going to stick by your contract when it goes favourably we will have the law of the jungle.'' Mr Booth said most of those dishonouring their contracts were simply ''walking away from them and saying they are not going to have anything to do with them''.