Quota hopes raised by China-Australia meeting

August 17, 2007 - Hopes of resolving some of the concerns surrounding China's decision to suspend the issuing of new wool import permits as of July 17 have been raised following a meeting between senior officials from the Australian Embassy, the Department of Agriculture, Fisheries and Forestry and the Chinese Ministry of Finance and Commerce (MOFCOM) in Beijing last Friday.

MOFCOM confirmed that the 287 million kilogram (kg) quota for greasy, scoured and carbonized wool for 2007 has been fully allocated, but that only 177 million kg has been filled. Only 10 million kg of the 80 million kg quota for tops has been filled. If placed under pressure, it is hoped that MOFCOM will consider combining the raw wool and tops quotas to give a single figure of 347 million kg, thereby allowing the immediate application for new quotas.

MOFCOM also acknowledged an awareness of the impact of its decision to freeze import permits on the Chinese industry, as well as the need for greater transparency, stating that it would consider monthly publication of key data on the MOFCOM Web site.

However, while MOFCOM said that a resolution would occur, no timetable was given nor any indication as to how the issues would be resolved. The effective deadline for a resolution is Sept. 15 - the date for legislated recall and re-allocation of unfilled quota.

Despite the hopes raised by the meeting, analysts say that it is becoming increasingly likely that China will import less wool in the second half of the year than in the first half. Imports of around 20-25 million kg per month, compared with the 28 million kg per month imported this year so far, based on MOFCOM data, will fill the remaining 100 million kg of quota.

The reduced flow of wool into China since July 17 is continuing, and offerings at auctions in Australia over the first three weeks of the new season have been exceptionally low - down by 19.8 percent compared with the same period last year. Experts say that the drop has almost certainly not been entirely due to uncertainty over the quota issue.
Reprinted in part from The Wool Record Weekly Market Report

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