China's cashmere industry needs to cut capacity and raise quality if the sector is to retain its luxury positioning, says Andrew Bartmess, chief executive of UK cashmere group Dawson International.

Speaking with just-style during a cashmere forum in Beijing last week, Bartmess said overcapacity in China is driving down prices and levels of quality.

"Cashmere is becoming more and more of a commodity, no-one in the industry is making money anymore," he said.

Bartmess believes there could be double the capacity actually needed in China to turn the available cashmere fibre into garments.

"When a large order comes in, giving manufacturers the opportunity to use up some of their capacity, it's hard for them to push for a higher price."

This large capacity and growing demand for lower cost cashmere garments from mass market retailers has in turn encouraged Chinese traders to accept lower quality, coarser raw material from Inner Mongolian and Mongolian goat herders.

"The level of quality available before just doesn't exist anymore," said Bartmess.

Leading Chinese cashmere companies attending the forum said they want to reverse this trend but it could take time to persuade both traders and farmers to focus on quality.

Farmers earn CNY20 (US$2.7) per goat each year for its cashmere hair, estimated one Chinese producer, and quantity has become more important than hair quality.

Bartmess is calling for the branding of high quality raw material for use in high-end garments. "There would be people prepared to pay for that higher quality, like us," he said.
 
China produces 70% of the world's cashmere but margins on the luxury fibre have plummeted in recent years. One producer, Inner Mongolia Dongda, says its margins are down from about 200% ten years ago to 3% today.

By Dominique Patton.