Wool exporters worried despite lengthy yarn on contracts

Sue Green

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''.

The council's director, Mr Bob Quirk, was in Beijing last week to meet trade and government officials.

After an initial lack of success, he eventually received assurances from the government's Ministry of Foreign Trade and Economic Co-operation that the debtors would be press to pay.

Mr Booth said: ''We have now got to see that translated into action. There's no way of judging what the assurances are worth, but it is much better that they say that than that they have nothing to do with it, especially if it highlights to the Chinese the seriousness of their actions and the damage they are likely to do to themselves.'' China is Australia's largest single-nation wool buyer and will take about 20 per cent of the Australian wool clip, worth $600 million to $700 million, by the end of the current season on June 30.


Mr Booth criticised the Australian Government for playing down the Chinese wool contracts problem.

''They have said provided the contracts are tied down there is no problem, but they are not living in the real world.'' The Australian wool industry is facing a crisis. Minister for Primary Industry Simon Crean has been joined by the state governments in criticising the marketing efforts of the Australian Wool Corporation.


Australia has a wool stockpile of almost four million bales, which an International Wool Secretariat official has suggested burning.

Another suggestion involves using it to sop up oil spills, and the Country Women's Association has offered to knit it into blankets and jumpers for the poor - a task that would take hundreds of years.