CONTINUING weak demand for Australia's superfine is being blamed on the lack of affordable credit insurance, according to Will Lempriere, head of Australian wool exporter Lempriere.

Despite the general strength of the wool market, which last week saw AWEX's Eastern Market Indicator close up another 16c to 942c/kg clean, prices - or more particularly premiums - for superfines (less than 18.5 micron) continued to disappoint.

Although the southern 18-micron indicator rose 19 cents for the week to close at 1213c/kg clean, the premium against the 21-micron wool is now only 21 per cent.

In more buoyant times, the premium would normally be 60 per cent plus, and more than compensate for the lighter but finer fleeces.

Mr Lempriere said the current lift in the market was due to the weak supply situation and low level of inventory held by Chinese processors.

"The fundamentals in the wool market haven't changed," he said.

One of those fundamentals was the lack of demand for superfine wool from Italian processors, which according to Mr Lempriere, is not being helped by the absence of affordable credit insurance.

Unlike Chinese processors, who buy wool with letters of credit, most European processors bought greasy wool on terms of up to 120 days.

That was the case until last January, when the global financial crisis forced insurance companies to either withdraw from providing credit insurance to exporters or raise their premiums to prohibitive rates.

For many years, such insurance had been provided by the Federal Government-backed Export Finance and Insurance Corporation.

For much of last year the Australian wool trade was confident of winning support from the Federal Government, particularly Trade Minister Simon Crean, to allow EFIC to re-open coverage to exporters.

This week, Wool Exporters executive director Peter Morgan was pessimistic of any Government support.

Dr Morgan said there was a view European processors should buy and finance their greasy wool on the same terms as the Chinese.

"But it is not easy to get processors who have long depended on credit to switch to cash terms," he said.

However, this week a spokesman for Mr Crean said the Government had yet to receive direct approaches from a wide cross-section of wool exporters on the issue.

The spokesman said discussions were still ongoing between EFIC and the Italian Government to explore the possibility of joint support for Australian wool exports to Italy.