Hawke's Bay's place in the wool industry is being highlighted by site expansion proposed by wool-scouring giant Cavalier at Awatoto if approval is given for buyout of New Zealand Wool Services International.
The buyout plan is before the Commerce Commission, with strong hopes it will be seen as in the best
interests of the wool industry.
If it went ahead, Wool Services scouring operations at Whakatu and in Christchurch would be merged with the Cavalier operations at Awatoto and Timaru respectively, Cavalier chief executive Nigel Hales told Hawke's Bay Today.
Extending the Awatoto facilities to cope is projected and budgeted, with possibilities for other development in the area of other facilities such as the "super store" wool-handling facility being called for to streamline the supply chain and provide a clear line of sight between wool farmers and customers.
Mr Hales said it would be the eighth merger involving Cavalier in 10 years and would see the company scouring almost 80 per cent of the national woolclip, marginally the greater proportion at Awatoto. Currently, the other 21 per cent is exported as greasy wool.
Cavalier has previously absorbed Gisborne Wool Scour, Lichenstein in Auckland, Ferriers Winchester, Seaview Wool Scour, Godfrey Hirsts, Fairlie Wool Scour and Ashburton Wool Scour.
Cavalier is half-owned by Cavalier Corp and 25 per cent each by Direct Capital and ACC, while 63.87 per cent of Wool Services is owned by Plum Duff and Woolpak Holdings, both in receivership.
The commission has to assess whether the monopoly has the effect of "substantially lessening" competition in the market and whether benefits to the public outweigh detriments, and is seeking submissions.
Cavalier says the long line of scouring industry rationalisations have been made in an effort to provide appropriate scouring capacity to the reducing size of the national sheep flock.
It says merger benefits include the potential to drive efficiency, reduce costs and remain competitive with offshore wool processing, retain wool scouring under New Zealand ownership and help position New Zealand's wool industry to compete in a global market.
"We are confident the previous mergers have contributed to structural improvements in the wool sector and we are proud of these achievements," said Awatoto-based Mr Hales.
"The scouring industry has a counter-intuitive factor to it, where inactivity leads to scouring price increases, while mergers hold or reduce prices.
"This is achieved through increased efficiencies, which spread the costs of scouring over larger wool volumes.
"The merger will create the same positive outcomes as previous CWH mergers by maintaining price efficiency for wool farmers and exporters, particularly in the face of cost increases from its own suppliers in energy and wage increases, and the introduction of the ETS charge this year.
"We have significant past experience in leading merger activity within the scouring industry to gain greater cost efficiencies and to increase the sector's global competitiveness.
"Without a national competitive platform, our scouring sector will end up depleted of domestic scouring capability as is the situation in Australia."
While CWH is the major player in New Zealand's scouring industry, the industry competes with the growing scouring industry in China, which now represents half of the world's wool imports.
"CWH enjoys a relatively neutral stance in the wool industry and looks forward to working with all participants for the greater industry good. It is our aim to ensure New Zealand continues to be a world leader in the growth, production and sale of high-quality wool. The merger of CWH and the NZWSI scouring operations will continue to support and enhance the New Zealand wool industry."
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