CASHMERE

CHINESE

Prices remained firm during the first ¼ of this year mainly driven by domestic demand and reached levels western manufacturers found difficult to absorb. We expected some downward adjustment with the arrival of the new clip which began around the time of the Cashmere Forum in Beijing during early April. ERDOS, China’s largest sweater manufacturer are trying to control the raw material market by forcing all the major Chinese dehairers to form a joint export sales company for marketing cashmere fibre with a minimum sales price for the season. This system is similar to the old marketing regime under Tuhsu and the export corporations. We are not sure the system can work long-term but it has given Chinese dehairers confidence to begin buying the new clip, which has resulted in a slight firming of prices over the past week or two. Now is a good time to confirm a proportion of expected requirements for the coming season as the best quality material from the new clip will soon be exhausted and we expect prices to firm in the autumn.

MONGOLIAN

Prices are also easier in line with Chinese but should also increase later in the year.

AFGHAN / IRANIAN

Also fallen slightly in line with Chinese and Mongolian.

CAMELHAIR

No change in prices with reasonable availability and the new clip arriving in the next month or so.

ANGORA

Market firm due to high domestic demand in China with limited availability and as usual Chinese quality standards have deteriorated making new business very difficult.

SILK

Prices continue to increase due to relatively poor cocoon harvest and good demand. We do not anticipate any change in this trend until the next cocoon harvest in July.

For and on behalf of
Cashmere Fibres International Ltd

David M Lee
25 May 2005