Supply, oil packs a wool punch

22 May, 2002 10:00 PM

AUSTRALIA'S shrinking wool clip and high crude oil prices are being blamed for an 80-90pc jump in the cost price of nylon wool packs since March.

But wool brokers and grower groups suspect a lack of competition may be the real reason for the dramatic rise from $10 to $19 a pack, and are pledging to further investigate the cause of the rise.

Higher oil prices have only increased nylon yarn prices by about $1 a kilogram, not enough to justify a $9 rise in pack costs, which contain just 1.4kg of nylon on average.

There are also doubts Australian wool production has fallen enough in the five years since nylon packs began replacing High-Density Poly-Ethylene (HDPE) packs to have tightened overheads for manufacturers so dramatically.

Nylon wool pack prices in WA this week were being merchandised for between $17-$20.90 each, GST inclusive. Primaries sold wool packs to its clients at $15.70 as part of a service.

The price rise also coincides with the demise of Australia's only locally-made wool pack, the Jumbuck, which was manufactured by Melba Industries, a division of Austrim Nylex, at Geelong from July 2000 to December 2001.

AWEX general manager industry services Lindsay Spencer said 100pc of the wool packs now used in Australia are manufactured overseas, most commonly in Asia.

The New South Wales Farmers Association is contemplating whether a case exists to alert the Australian Competition and Consumer Commission.

"I suspect it must be more than that (oil prices), because when oil prices shot up last year it did not affect pack prices, and there was more competition around then," NSW Farmers Association wool chairman Duncan Fraser said.

"We will look into it and alert the ACCC if there is any need to check out whether there is collusion, or whether it is just a genuine lack of packs available domestically."

Wesfarmers Landmark spokesman David Coombes said Wesfarmers as a reseller had been forced to pay a large increase in pack prices in the past three months, from about $12 a pack to $19.

Mr Coombes said the number of mills producing nylon packs were limited, and relied upon forward projections of demand volumes when the Australian wool industry switched from HDPE to nylon packs for contamination reasons.

Since that time the size of the Australian wool clip had fallen, causing manufacturers to claim their economies of scale were no longer there and prices had to rise to justify the shortfall.

"But we would say we are not convinced these reasons are enough to warrant the size of the price rise, and we are looking at alternative sources," Mr Coombes said.

He said Wesfarmers was also considering re-visiting the concept of plastic packs, which the company spent considerable money developing prior to the widespread introduction of nylon packs in the late 1990s.

Prior to its departure from the market, the Melba Industries wool pack plant at Geelong had the capacity to produce one million packs a year, a third of the Australian market.

A Melba Industries spokesman, who wished to remain unnamed, said the company made a "commercial decision" to close prior to Christmas last year.

"There are a lot of vested interests in the industry," he said.

"When prices went up, we had growers call us and say, open your plant back up again, but I have a feeling that if we did that, other nylon pack prices would suddenly come back down again.

"But we're a big company, we have moved on to other things and we would prefer to stay out of it."



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