The power crisis in China is shocking the Australian wool industry. Agricultural input price also tipped to rise

The Chinese government has imposed restrictions on electricity use, which has had an immediate impact on the manufacturing sector and global markets such as wool.

Stuart McCullagh, CEO of Australian Wool Innovation (AWI), said some Chinese factories had cut production by 40 percent this week due to the power cuts.

“There are probably five major oily wool processors in China and some of them are located in those provinces [affected by power cuts], so it will have an effect,” he said.

“How long this takes… it’s completely out of our control.”

Australia’s benchmark for the wool industry, the Eastern Market Indicator (EMI), closed the week at 1,337 cents per kilogram, down 31 cents, with a high pass-in rate of 22.7 percent.

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What caused the energy shortage?

It is clear that power plants in China are forced to limit supply due to tight coal supplies and high prices.

According to Rabobank analyst Wes Lefroy, the rationalization of energy also comes at a time when China wants to reduce its greenhouse gas emissions.

He said industrial production was hardest hit, and for Australian farmers this could lead to: fertilizer and glyphosate prices go even higher.

“This [energy] announcement will have major consequences for [the price of] inputs, especially for glyphosate,” he said.

“China is responsible for 65 percent of global glyphosate production and much of Australia’s glyphosate imports.

“What I’m hearing from colleagues in China is that the production of yellow phosphate, a feedstock for the production of glyphosate, will be reduced by 40 percent, and as a result we expect a large decrease in the level of glyphosate output.”

More than 80 percent of Australian wool is exported to China.(

Supplied: Wool.com

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How long can this go on?

The chairman of the Australian Council of Wool Exporters, Josh Lamb, said Chinese buyers expect possible closures of up to six months.

“Most factories face power constraints during peak season in China, but this is the first time [there are] restrictions outside that period,” he said.

“We are just entering the first part of the season… and things are now starting to come up for auction with growers looking to sell their wool, so it’s not a good timing for us.

“It could put a damper on the market in the next few months if factories can’t run at 100 percent capacity, they’ll be less likely to buy the usual amount they would most weeks.”

Stuart McCullough AWI boss in office
AWI CEO Stuart McCullough says the organization is working to better understand the energy crisis in China and its consequences for wool growers.(

ABC Rural: Cara Jeffery

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Tianyu Wool’s global purchasing manager Angus Hook says the power restrictions have had an immediate impact.

“We didn’t hear about the closure until early in the week,” he said.

“Luckily we have solar power on our top factories so we can work during the day.

Rabobank’s Wes Lefroy said many Chinese pollution restrictions are likely to remain in place at least after the Beijing Winter Olympics in February 2022.

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