Overview of Global Wool Demand and Supply
(June 1, 2012) Although wool prices have pulled back in the last 12 months, they still remain at very high levels. Can these favorable wool prices be sustained? That was the question posed by Chris Wilcox, chairman of the International Wool Textile Organization’s (IWTO) Market Intelligence Committee, during the IWTO Congress.
To answer this question, Wilcox explained that the world wool production will fall slightly in 2011-2012 (1.6 percent) with a small recovery predicted for the 2012-2013 (1.2 percent) growing season. Argentina, New Zealand, South Africa, China, India and the United States are expected to have lower production this year. Australia and Uruguay expect no change in production while the United Kingdom and Brazil predict a lift in wool production. There is very little raw-wool stock available around the world and the production of medium micron wools is declining.
“Wool demand in 2011 can best be explained as a tale of two halves,” says Wilcox.
The first six months of 2011 reflected an economic recovery, better consumer confidence and better retail sales in some markets. There was a buoyant mood at fabric fairs for fall/winter 2011 leading to increased orders and activity in the wool textile industry, especially in Europe. Wool prices were competitive with other fibers as cotton prices surged and the price of synthetic fiber was higher. This positive mood in the wool textile industry led to a higher demand for raw wool in this time period.
Unfortunately, things changes in the second half of the year. Severe worries about government debt in Europe lead to falling consumer confidence, lower economic growth and a slowing in retail clothing sales. The demand for clothing across all fiber lines declined, resulting in a lower demand for fiber. The demand for raw wool lessened in the second half of 2012.
“The wool textile industry became nervous and less optimistic at this time,” comments Wilcox. “Cotton and synthetic fiber prices experienced a sharp decline making wool less competitive.”
So what is the prospect for wool in 2012-2013? Again, the scale is weighted on both the positive and the negative side of the discussion.
Trends leading to a more optimistic future remind the industry that wool production and supply is low, particularly for medium micron fibers, and the level of wool in the pipeline is low. Consumers are leaning towards the purchase of more natural fibers of which wool is a very viable contender. Finally, there are signs of recovery in the U.S. economy leading to a slow recovery of consumer confidence.
The recession in Europe coupled with the weakening of China’s economic growth point to concerns for the wool industry in the next year. Apparel retail sales are waning impacted by higher fiber prices causing a weakening in the demand for raw wool. With wool prices at historically record highs in U.S. dollars, wool price competitiveness with other fibers is vulnerable.
“This discussion brings us back to the question at hand, can high wool prices be sustained?” questions Wilcox. “In my mind, there are factors for us to watch that will help predict the answer.”
Some of the factors to watch are listed here.
• The changing flock structure in response to the high sheep meat prices. Producers are raising more crossbred sheep in an effort to supply the meat markets.
• The government debt in Europe and in the United States will have an impact on the global economy.
• How long will the market be supply driven?
• Will retailers and consumers accept the higher clothing and interior textile prices?
• Will wool lose out to other, cheaper fibers?
An industry panel that pursued responded to these questions by recommending that the wool industry needs to stimulate demand for its products by transforming the image of wool as sustainable, natural and renewable. The focus should move away from price and transition to appearance, quality and features. Wool is a high-performance fiber that needs to be rediscovered for its many properties including breathability, fire resistance, easy care and comfort.
Taking it one step further, the industry should put into its plans the development of relationships with designers to not only inform them about the unique and positive characteristics of the fiber but also to help them revolutionize wool products and services to bring new consumers to wool. Meeting a price point, utilizing blends and developing trendy designs, texture and colors could all help to increase the demand for wool fiber in textiles.