THERE would be more volatility in the wool market if smaller Australian processors disappeared, according to GH Michell and Sons WA manager Jon Bahen.
GH Michell is Australia's biggest carboniser, scourer and topmaker. It buys 20pc of Australia's wool clip.
Mr Bahen said Michell had no plans to downsize but was likely that some smaller processors would close because they were unable to compete with international factories.
"China's processing capacity is continuing to grow and it is likely that they will dominate the industry in the future," he said.
"Some Australian processors will struggle to compete with China and there could be a retraction of topmaking factories. That could create a more volatile market for growers."
Mr Bahen said processors were being squeezed from both sides.
"Processors are trying to maintain capacity but there is a lack of retail demand and a lack of supply," he said.
"We know the prices need to be this high for the growers but there is already difficulty selling tops at this level.
"The rising dollar dampens demand and processors are unable to pass on rapid prices rises."
He said some processors would switch to other textiles.
"If we continued to big price fluctuations and falling demand, some processors would make the switch," he said.