Cashmere Price hits the Ground
May 16 (Mongolian Economy) The cashmere trade is thought to be the most known and visible industry in Mongolia. Although beneficial to both sellers and buyers, cashmere production faces the hard reality of price. Price is often hard to estimate and is just as sensitive to market swings as gold, copper or oil.
Herders are uncertain whether the price is likely to sky rocket or fall to the ground. Anticipations, however, are high. Last year cashmere reached its peak price of MNT 50,000, said G. Yondonsambuu, the vice leader of the Mongolian National Cashmere and Wool Association.
"Whether or not we accept it, the cashmere price could fall to MNT 40,000 [a kilogram] or even MNT 36 thousand", he said.
On 24 April the price had fallen to MNT 45,000 for a kilogram of cashmere. Yet, rumours that one kilogram of cashmere would grow to MNT 100,000 linger still. However, such expectations have been put on hold. Thus there have not been many who can sell their cashmere at initial prices.
A sudden drop in price has panicked herders who had hoped to sell their cashmere for MNT 100,000 a kilogram. Yet disappointment for herders is advantageous to producers. For that reason the Cashmere and Wool Association estimated the opening price for this year would be between MNT 56,000 and MNT 58,000. However, the initial price climbed past MNT 70,000, which has caught many by surprise.
The Chinese, who have dominated the Mongolian cashmere market over the past ten years, are to blame, for they have strayed from the association's estimates. Mongolia`s basis for comparison in the global cashmere market is China. That's why Chinese cashmere traders know where in Mongolia they can find the best cashmere.
The Chinese have offered to pay more so they can buy all of the available cashmere on the market. However, Yondonsambuu said that the Chinese have failed to dominate the Mongolian cashmere sector.
Apparently there will not be much strong competition within the Mongolian cashmere trade because the market's major consumer, Europe, has been dealing with its own economic difficulties. Also, cashmere prices tend to experience four-to five-year cycles of up and down swings. It appears that this year has kicked off a period of descent.
In the middle of last year, combed goat cashmere, the market term for processed cashmere material, cost around MNT 130,000 a kilogram compared with prices hovering around MNT 100,000 a kilogram now. Keeping the rates of raw cashmere in mind, the price of cashmere on the global market this year could fall as low as MNT 50,000.
In addition, the Chinese government has stopped supporting loan growth.
Thus, Mongolian companies to collect as much cashmere as they do from the domestic market. Even though Chinese traders come to Mongolia with tonnes of cash, domestic producers have experienced change for the better. Mongolian producers have improved their financial abilities with the bond offering that aimed to support cashmere and wool production as well as small-medium enterprises released by the Ministry of Finance last year.
The media has reported that although Mongolian traders are not likely to declare war with Chinese sellers, their Mongolian competitors have the ability to purchase cashmere from herder campsites at fair prices. According to traders at the Emeelt raw material market, exposure to Mongolia's cold and windy weather during transport is affecting the quality of cashmere. Cashmere is delivered from east to west, meaning that after paying high prices in the eastern provinces and passing through Khuvsgul to the western provinces, traders are likely to get less than they paid for with their damaged goods.
With implementation of the Agricultural Market Law beginning 1 June, the law will bring change to the domestic cashmere and wool trade. The deputy director of Eermel, A. Tumur-Ochir, said that it would require a lot of time to create a market and to establish coperation.
"It's difficult to complete the preparational work needed quickly enough. So direct enforcement would not be easy. It is impossible to implement it this year", said Yondonsambuu. "But next year we start selling on the bourse".
Cashmere and wool dealers have banded together to establish the National Cashmere and Wool Committee in conjunction with the proposed agricultural trade law. Advised by Japan to attempt to conquer the European market, industry associates have cooperated to enter the global market under the shared-name Mongolian Tansag Us (Mongolian for fine Mongolian cashmere).
It seems cashmere producers have finally rid themselves of their complaints of domestic market prices. Cooperation has created new possibilities.
Herders are uncertain whether the price is likely to sky rocket or fall to the ground. Anticipations, however, are high. Last year cashmere reached its peak price of MNT 50,000, said G. Yondonsambuu, the vice leader of the Mongolian National Cashmere and Wool Association.
"Whether or not we accept it, the cashmere price could fall to MNT 40,000 [a kilogram] or even MNT 36 thousand", he said.
On 24 April the price had fallen to MNT 45,000 for a kilogram of cashmere. Yet, rumours that one kilogram of cashmere would grow to MNT 100,000 linger still. However, such expectations have been put on hold. Thus there have not been many who can sell their cashmere at initial prices.
A sudden drop in price has panicked herders who had hoped to sell their cashmere for MNT 100,000 a kilogram. Yet disappointment for herders is advantageous to producers. For that reason the Cashmere and Wool Association estimated the opening price for this year would be between MNT 56,000 and MNT 58,000. However, the initial price climbed past MNT 70,000, which has caught many by surprise.
The Chinese, who have dominated the Mongolian cashmere market over the past ten years, are to blame, for they have strayed from the association's estimates. Mongolia`s basis for comparison in the global cashmere market is China. That's why Chinese cashmere traders know where in Mongolia they can find the best cashmere.
The Chinese have offered to pay more so they can buy all of the available cashmere on the market. However, Yondonsambuu said that the Chinese have failed to dominate the Mongolian cashmere sector.
Apparently there will not be much strong competition within the Mongolian cashmere trade because the market's major consumer, Europe, has been dealing with its own economic difficulties. Also, cashmere prices tend to experience four-to five-year cycles of up and down swings. It appears that this year has kicked off a period of descent.
In the middle of last year, combed goat cashmere, the market term for processed cashmere material, cost around MNT 130,000 a kilogram compared with prices hovering around MNT 100,000 a kilogram now. Keeping the rates of raw cashmere in mind, the price of cashmere on the global market this year could fall as low as MNT 50,000.
In addition, the Chinese government has stopped supporting loan growth.
Thus, Mongolian companies to collect as much cashmere as they do from the domestic market. Even though Chinese traders come to Mongolia with tonnes of cash, domestic producers have experienced change for the better. Mongolian producers have improved their financial abilities with the bond offering that aimed to support cashmere and wool production as well as small-medium enterprises released by the Ministry of Finance last year.
The media has reported that although Mongolian traders are not likely to declare war with Chinese sellers, their Mongolian competitors have the ability to purchase cashmere from herder campsites at fair prices. According to traders at the Emeelt raw material market, exposure to Mongolia's cold and windy weather during transport is affecting the quality of cashmere. Cashmere is delivered from east to west, meaning that after paying high prices in the eastern provinces and passing through Khuvsgul to the western provinces, traders are likely to get less than they paid for with their damaged goods.
With implementation of the Agricultural Market Law beginning 1 June, the law will bring change to the domestic cashmere and wool trade. The deputy director of Eermel, A. Tumur-Ochir, said that it would require a lot of time to create a market and to establish coperation.
"It's difficult to complete the preparational work needed quickly enough. So direct enforcement would not be easy. It is impossible to implement it this year", said Yondonsambuu. "But next year we start selling on the bourse".
Cashmere and wool dealers have banded together to establish the National Cashmere and Wool Committee in conjunction with the proposed agricultural trade law. Advised by Japan to attempt to conquer the European market, industry associates have cooperated to enter the global market under the shared-name Mongolian Tansag Us (Mongolian for fine Mongolian cashmere).
It seems cashmere producers have finally rid themselves of their complaints of domestic market prices. Cooperation has created new possibilities.
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