CHINA

Since the Chinese government announced last November to support cashmere raw material prices from the new clip we have seen frantic activity both in the domestic and international markets to buy up existing stocks, which has resulted in price increase of 15-20%, with limited availability of good quality White for White types. Some purchase activity by Chinese domestic manufacturers has been speculative and they are holding stock in anticipation of further price increases. We have seen no willingness to sell or weaker prices leading up to Chinese New Year and availability will remain tight until the new clip arrives.

MONGOLIA

Almost all available material has been sold and used with little or no dehaired fibre remaining at origin. Prices have increased by almost 100% since last spring and as the spinning season gets underway we could see a severe shortage of availability as the new clip will not be available in Europe until June/July.

AFGHANISTAN /IRAN

Prices have increased slightly as traders hear about Chinese/Mongolian market movement but dehaired prices are now moving back into line compared to Mongolian which was cheaper for most of last year. We hope Chinese buyers will not over-excite the market.

OTHER FIBRES

Yak and camelhair prices remain firm on the back of increased cashmere levels. Availability is still reasonable. Silk and angora prices have increased over recent months mainly due to domestic demand in China.

CONCLUSION

We expect the new cashmere clip to begin at current levels and probably increase later in the year as manufacturers worldwide compete for material left available after Chinese government support for it’s major cashmere manufacturers.

This will be a year for buying sooner rather than later and an indication of fibre requirement over the year will greatly assist us in planning our purchase strategy from the new clip.

For and on behalf of

Cashmere Fibres International Ltd

David M Lee – 10 February 2010

 We have just received the following information from our Chinese office:

 The Chinese government have announced a financial incentive to support cashmere raw material prices for next season’s clip.  They have agreed to make an interest-free loan to the following companies to purchase the following quantities of greasy cashmere :-

 ERDOS                          3000 tons

KINGDEER          1000 tons

Other major Chinese dehairers collectively  -  2000 tons.

This amounts to more than half the annual Chinese clip and will almost certainly instigate panic buying from other cashmere processors, leading to fibre shortage and increased prices.

 This policy will almost certainly affect demand and prices of Mongolian cashmere next year.

 We will pass on any further information as and when received.

 For and on behalf of Cashmere Fibres International Ltd

David M Lee

19 November 2009

Prices increased over the summer months mainly due to domestic demand.  Now that the domestic season has finished prices have leveled off, slightly below last year’s level.  The Chinese clip is now estimated at 10-12 million kgs greasy per year and availability is generally good.  However fibre diameter is increasing due to cross breeding by herdsmen to achieve higher yields.

New camel and Yak clips are now available and prices remain around last year’s levels.

MONGOLIA:

New clip prices almost halved in April due to low demand and a collapse of the Mongolian Tugrig against US dollar.  This prompted frantic buying activity (mainly by the Chinese) in April/May/June and prices rose rapidly until August.  They have now leveled off but there is little or no good quality material available at origin.  Prices are still attractive compared to last year and other origins.  There is likely to be a shortage over the season and prices should firm up next year until the new clip arrives in March/April.

Annual greasy production is now estimated at 6 million kgs.

AFGHANISTAN / IRAN

Prices never really fell earlier in the year and remained expensive compared to Mongolian.  There has been very little demand from Europe but the Chinese have been buying.  Prices have increased 10-15% over the summer and very little fibre remains in herdsmen’s hands.  Afghan clip approximately 1.5 million kgs;  Iran 1-2 million kgs.

CONCLUSION

Higher prices are not helping market conditions and we expect business to remain difficult over the winter season.

The Chinese have driven up prices and still seem to under-cut spinners and manufacturers in Europe mainly due to the export rebate from the Chinese government (13% on yarn and 15% on cloth and garments).  These subsidies contravene WTO regulations and will destroy cashmere manufacturing in the west, if not tackled.  The CCMI have drawn these rebates to the attention of the US government although we can expect little help from them due to the small level of cashmere processing remaining in the USA.  We could possibly hope for more action from the EU government if anyone can bring the issue to the attention of MP’s at local, national or European level.

For and on behalf of

Cashmere Fibres International Ltd

David M Lee  -  16 November 2009

The year started with Chinese and Mongolian greasy prices falling as expected in view of the world economic situation.  Mongolian prices then fell even further in April as a result of the Mongolian Tugrig falling by 50% against the US dollar, almost overnight.  Chinese new clip prices eased slightly but Afghan/Iranian prices remained firm.

 In May the Mongolian government removed the export duty on greasy and scoured cashmere which has allowed the Chinese to buy almost the entire Mongolian clip and export back to China.  The Chinese government have made RMB 700 billion (USD 100 Billion) available to Chinese businesses to stimulate their economy.  They have also increased the export subsidy to 13% for yarn and 15% for sweaters. (Anyone with political connection should take up this point in relation to China’s WTO membership as it definitely gives Chinese manufacturers an unfair advantage).

 As a result of all this activity, Mongolian cashmere prices have increased dramatically over the summer and very little fibre remains in Mongolian hands.  Some suppliers are reverting to form and not honouring contracts.  Chinese prices are also on the up due to domestic excitement.  Maybe we have now reached the point where western demand for cashmere products no longer determines market movement.

 Afghan/Iranian prices have also increased over the last few weeks.

 CAMEL  clip is only now becoming available and prices are at similar levels to last season.

 SILK AND ANGORA prices have also increased over the past few months.  Again mainly as a result of domestic demand and excitement in China.

 CONCLUSION – China has definitely received substantial late season garment orders, which will have contributed to domestic demand, but these orders are now coming to an end.  It remains to be seen if recent increases can be maintained between seasons as most of this year’s fibre is now in the hands of speculators or processors and must eventually find a home in fibre, yarn or garment form.  On the other hand the western processing pipeline seems fairly empty.

Retail activity over this coming winter should ultimately determine the level of demand for textile fibres and future market movement.

Firstly, this year most of the cashmere processing mills didn’t buy as much cashmere as before one reason being that Chinese banks didn’t give as many loans because of the Chinese government’s strict financial policy. Secondly the Chinese cashmere companies spent most of their money on other business like mining and real estate and didn’t have enough money left to buy cashmere materials because they found they couldn’t get enough profit from this.

He was told by them there is still a lot of greasy cashmere available in the producing areas, some said a half of the total Chinese cashmere collection is left and some said a third.

During the last few years, Chinese herdsmen have introduced a lot of cashmere goats from north-eastern China to Inner Mongolia and other main producing areas in order to get bigger yields than before from each goat. This year we found that the Chinese cashmere micron is coarser than the previous year. At the fair, most of the mills told him they couldn’t offer any W4W Chinese cashmere at 15.1 or 15.2 micron. They can only offer W4W Chinese cashmere around 15.5 micron. Brown Chinese cashmere is not as plentiful and shorter than in previous years. Most of the mills have no brown Chinese cashmere to offer and the ones that do their longest brown Chinese cashmere is 32-34mm.

We feel that eventually Chinese prices may fall slightly, but at this time the Chinese mills are only willing to buy greasy and sell dehaired if they can make a reasonable profit. Until the economic situation stabilises and Chinese interest rates fall, many suppliers are uninterested in processing cashmere.

Chinese sweater exporters are bust producing garments for sale through large retail chains and supermarkets worldwide at artificially low prices. As a result they are forced to source raw material from cheaper origins such as Mongolia, Iran and Afghanistan which, in effect, increases the price at these origins, making traditional manufacturing in western countries difficult, if not impossible.

We saw a similar situation several years ago in Outer Mongolia when China moved in and bought all the raw material, thus starving domestic manufacturers of stock and forcing them out of business, which then eliminates competition and allows China to dictate the price of raw material.

For many years China has been seeking worldwide domination of the cashmere market and production of garments. Their recent joining of the World Trade Organisation (WTO) has made this easier as Europe and America have removed all import quotas on number of garment imports and there are no restrictive import taxes. On the other hand Chinese exporters still receive a substantial rebate (11% for yarn and 13% for garments) from their government to encourage the generation of foreign currency which allows them to under-cut any competitor. They can generally sell yarn at the same price as dehaired cashmere and garments at the same price as yarn produced by overseas spinners.

If China is allowed to continue dominating cashmere markets all other manufacturers will be forced to close, resulting in many job losses and further loss of added value in other countries.

CHINESE
New clip opened high as no stock left from last year. White for White priced over US$100. Big Chinese manufacturers are waiting as prices are too high for sweater export prices which are unchanged from last year. Export rebates for yarn and sweaters are expected to reduce 2% to 9% and 11% and dehaired prices should ease back slightly during the summer.

MONGOLIAN
New clip opened slightly above last years level then increased 10-15% due to strong demand from Chinese. Prices eased back slightly during late April as bulk of greasy from Western Aimags became available, but demand from Chinese is very strong and prices will remain well above last year’s level.

AFGHAN / IRANIAN
Prices have increased sharply due to high demand from Chinese (particularly White) to cheapen blend prices for garment exports. Prices likely to remain high for foreseeable future.

CAMEL
New clip will not be available until later in the summer and little or no stock available for prompt. Prices have doubled over the last year and expected to remain high due to strong domestic demand.

YAK
Similar position to camel. China are bleaching to disguise fibre structure and blending into lower cashmere qualities.

ANGORA
Only fibre to have fallen in price due to quality problems during earlier high demand. We no longer offer Chinese Angora but do have a limited quantity of South American Super Grade available in fibre or Tops.

SILK
Prices also higher due to strong domestic demand in China. Future market movement will be influenced by next cocoon harvest in July.

MARKET OVERVIEW
Chinese manufacturers are very busy producing for winter 07/08, keeping raw material prices very firm. European and western manufacturing now has very little effect on market movement.

For Cashmere Fibres International Ltd

MONGOLIA
The main changes recently are in Mongolia where the General Director of Buyan Cashmere Sweater Company has been appointed Minister for Trade and Industry. He has successfully tightened border controls with China and, for the time being, prevented the smuggling out of the country of greasy and scoured cashmere. After an initial increase in prices for the new clip costs have fallen back slightly as herdsmen realise the Chinese collectors are not as active as in previous years.

To encourage further added value within Mongolia the new Minister is also proposing US$4 per kilo export duty on dehaired cashmere, which will inevitably result in increased prices.

CHINA
To officially import Mongolian cashmere the Chinese must pay US$8 per kilo import duty, which dramatically increases their yarn cost. However they may have no choice as they have become reliant on Mongolian cashmere blends for their darker shades and there is not sufficient quantity of Chinese brown to cover demand.

Erdos are trying to reduce prices by offering some cheap KV38W4W on the export market but due to a good balance of supply and demand we doubt their attempts to manipulate the market will be successful. Due to demand of domestic production, price of shorter types remains very high.

AFGHAN / IRANIAN
The market remains firm although bulk of new clip is not yet available.

GENERAL
We do not anticipate any large fluctuation in price over the coming season as the recent influx of Chinese produced garments has opened the world cashmere market to a much larger customer base, producing a more consistent balance between supply and demand and the cheaper prices of Chinese garments means the domestic producers must maintain prices within a limited band.

CAMEL

Strong domestic demand has increased prices of MC5 and lower qualities 20-25% since the beginning of the year. Finer types – firm but reasonable quality available. The new clip will not be available until mid summer.

SILK

Silk sliver and yarn prices increased rapidly since the beginning of this year due to poor cocoon harvest, resulting in reduced quantity of sales. We expect prices to ease back towards previous levels providing June/July cocoon harvest produces expected quantities.

ANGORA

Higher angora prices from China due to increased domestic demand have resulted in the usual decline in quality standards and we have decided to withdraw from this market. We do have small quantities of South American angora available at higher prices but with dependable quality.

For Cashmere Fibres International Ltd

………………………………………..
David M Lee (Director) April 2006

Prices increased during last month due to above and increased domestic production and predicted to rise further later in the year. Large domestic manufacturers are still waiting for cash from this year’s sweater sales and from government loans. They have not yet started buying the new clip.

Quality of new clip is good with reasonable availability of White 36mm +. 34mm and below almost unavailable and same price as longer types. Brown Chinese is also rare and very expensive.

Almost all new clip sold by herdsmen and revaluation of RMB against USD will probably cause further price increase later in the year.

The proposed Union Cashmere Sales Company headed by ERDOS seems to be losing momentum with most of the larger suppliers in China. We cannot see this co-operative getting off the ground and do not think it will have any effect on the market.

MONGOLIA – Half the new clip bought by Chinese, quarter by local dehairers and balance is in the hands of herdsmen and merchants. Prices rising quickly in line with Chinese. Quality OK and reasonable availability now, but could be a shortage later in the year. We expect demand to increase as substitution for dearer Chinese types to average down prices for some manufacturers.

AFGHAN / IRANIAN – Prices increased in line with Chinese / Mongolian. Especially Brown which is now same price or dearer than other shades due to high demand from Chinese and European spinners. Good white is also in high demand.

CAMEL
Greasy prices increased slightly due to demand from Chinese processors particularly for coarser types. Still reasonable availability for most qualities.

ANGORA
Prices remain high causing drop in Chinese quality levels. Summer hair will be lower quality than winter hair.

D M Lee 20 July 2005