Cashmere prices have fallen since last October in China. The luxury market has shown signs of weakness from watches to bags, as consumer demand has softened, and so the decline evident for Chinese cashmere can be attributable to this larger trend.

Cashmere in the new season will be coarser, shorter and most probably with lower yields. This scenario also signifies a drop in quality. The supply side of the cashmere industry could be quite volatile in the light of export taxes and a smaller clip with coarser, shorter fiber in China. There could be a scramble for supplies of the best grade which could be in short supply and which could sell at a decent premium to inferior ones.

Mongolia is reportedly drafting a law to levy 10 per cent tax on exported cashmere fiber. With the introduction of this tax, the government is trying to limit the exports of semi-processed fiber and wants to support the Mongolian mills.

Iran is imposing a customs duty of 20 per cent on all exports of greasy Iranian cashmere. But since most big traders who have exported huge quantities from Iran in 2013-2014 undervalue their export invoices, the real effect is not 20 per cent but 5 to 7 per cent. The timing of this law, which came into effect in September 2014, coincided with the price drop of cashmere worldwide.