Australian economy feels Asian downturn

Australian economy feels Asian downturn

SYDNEY (Reuters): Major international trading houses and
banks in Australia are feeling the first effects of Asia's
economic shakeout broadening across the export commodities range.

Japanese, Korean, Chinese and U.S. trading houses, as well as
major Australian banks, all told Reuters on Tuesday that they had
still not felt major effects of Asia's economic crunch.

But many believed an impact force was building, with
Australia's A$4.0 billion wool exports possibly next in line.

Reports were circulating among trading houses of non-payment
for some wool purchases by South Korean importers, a trader with
a major Japanese trading house told Reuters.

Chinese wool buyers also had recently not paid for wool
imports, although this was not unusual for the Chinese, he said.

The most serious direct impact on Australian commodity exports
of Asia's economic crash remains confined to products not covered
by openly-traded markets, primarily A$400 million a year worth of
live cattle exports and, through downward price pressure, A$8
billion a year worth of coal exports.

But Japanese trading houses in Australia said they expected
the broad range of exports of Australian commodities to China,
Taiwan and South Korea would begin to be affected, with wool
possibly next in the firing line.

"Our export volume may decrease for these three countries.
Wool is the main commodity which may be worst affected to these
three countries," a trader with Marubeni Corp's Marubeni
Australia Ltd said.

This trading house had not been hit by non-payment for
contracts, he said. "(But) I'm afraid of it," he said.

An official with rival Japanese trading house Nissho Iwai
Corp's Nissho Iwai Australia Ltd described the Chinese market for
Australian commodity exports as having "gone quiet", while Korea
had been quiet for some time.

Reports among trading houses of some cases of recent Korean
non-payment for wool exports had joined the more normal case of
Chinese non-payments, he said.

First signs of Asia's economic woes hitting the wool market
join the severe impact which has already severely shaken
Australia's once-booming live cattle exports.

A 70 percent slump in the past two months of Australia's
exports of live cattle, primarily to Indonesia and the
Philippines, has been accompanied by poorly-financed importers
reneging on or abruptly canceling contracts.

But more sophisticated lines of defense in the Australia-Asia
trade finance system have so far held firm.

Letters of credit and foreign exchange arrangements were bank-
to-bank, a cushion against problems of non-payment, a spokesman
for Westpac Banking Corp told Reuters.

The Australian arm of major Korean trading company Daewoo
Corp's Daewoo Australia Ltd is waiting for the impact to strike.
"Whatever's in train is going ahead," said development manager
Andy Veness.

"But the outlook is not good for coal and energy," he said.
Imported products such as electronics, computers and earth moving
equipment would find an extra competitive edge because of the
devaluation of the won, he also said.

China's main capitalist-style trading house CITIC Australia
also said it had so far not felt an impact in its dealings with
Korea or other economically-shaken Asian nations.

The Australian operation of U.S.-based grains trader Cargill
Inc also has so far felt little effect.

The Australian Wheat Board reiterated on Tuesday that the
longer Asia's economic turmoil continued, the probability grew of
falling grain demand.