Source: Onoodor     Date: April 12, 2010

The price of cashmere has reached an unprecedented MNT53,000 per kilo in the eastern aimags where the product is of the best quality. At first glance this would seem very welcome, more so when herders have been badly hit by the weather and livestock loss, but the price rise is artificially manipulated by Chinese traders and their apparent generosity is more likely to have a sting in the tail for the Mongolian economy. By any reckoning, given the global price of one kg of raw cashmere is now USD 65-70, this high price is not realistic. Mongolia-based industries such as Gobi and Goyo have also had to pay the price jacked up by Chinese traders. With their limited capital they have naturally been able to buy far less than their actual needs. The bubble blown up by Chinese policy will soon burst and prices will plunge as supply of raw cashmere increases. However, Mongolian companies will no longer have the money to buy. The game seems to go like this: first, the Chinese manipulate an initial price rise so that Mongolian buyers exhaust their resources; then when prices fall, the Mongolian companies have no funds to take advantage of it, so the Chinese buy as much as they wish; finally, when Mongolian companies badly need cashmere, they find nothing for sale in the country and have to import Mongolian cashmere from China at a price dictated by traders who had originally taken it away. This is what happened last year and it seems a repetition is more than likely.