A sharp wool market fall due to slowdowns at Chinese mills confirms the need for Australia to be able to process fleece domestically, according to the group behind a proposed processing plant in outback Queensland.
- Electricity restrictions in China have forced wool mills to reduce production
- An end-to-end wool processing facility is proposed for Blackall in central west Queensland
- A developer says the plant would make the Australian wool industry “masters of our own destiny”
The Chinese government has restricted electricity use, due to limited coal supplies and high power prices.
In response, production at its wool conversion plants was last week reduced by up to 40 per cent.
It led to a sharp fall in the Australian wool market, with the Eastern Market Indicator last week closing the week down 31 cents, at 1337 cents a kilogram.
Queensland Wool Processors chairman John Abbott said it proved the need for the entire wool handling process — from fleece to fabric — to be done locally.
The group is raising seed capital to establish a new wool scour at Blackall, in central west Queensland.
Mr Abbott said the operation would enable Australia’s wool industry to become immune to many global variables that could affect production, prices and product availability.
“If you are subject to the whims and problems of an overseas manufacturer, then you will suffer the consequences of that,” Mr Abbot said.
Supply chain security is key
More than 80 per cent of Australia’s greasy wool is exported to China for processing.
Mr Abbott said disruptions in China would have a detrimental impact on customers of Australian wool.
“In time, you’ll see shortages of woollen products because of this change in the supply chain.”
Queensland Wool Processors hopes the situation in China will encourage investment in the Blackall plant.
It has been raising seed capital since July and plans to engage a project manager in coming weeks.
Last year, the Blackall-Tambo Regional Council commissioned economic consultants AEC to conduct a feasibility study into the proposed $198 million facility.
It found it would create 88 full-time jobs during construction and 812 full-time jobs in the region once operational, including 270 directly associated with the scour.
It also found the operation would generate $116.3 million in gross regional product per year.
Blackall investment would be ‘excellent’
AEC senior economist Jonathan Pavetto said the situation in China strengthened the case for the plant to be built.
“The investment conditions are firming up for it,” Mr Pavetto said.
He said the competitive advantages China had initially enjoyed were disappearing.
“They had cheap labour, they had cheap electricity and they had no environmental standards.
“The environmental standards in China are starting to increase, similar to where we are in Australia, their labour costs are going up and they can’t keep the lights on in their factories.
Mr Pavetto said access to Great Artesian Basin water, abundant land and the proximity of sheep stations to the proposed plant had already built a strong case for the Blackall plant to proceed, prior to China’s power restrictions.
He said the restrictions simply confirmed the holistic economic sense of investing in domestic processing facilities.
“It would be an excellent thing for regional Queensland and I think it could be quite a good thing for investors as well.”