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Key drivers for fine wool demand at retail says AWI

27 Oct '05

2 min read

Australian Wool Innovation Limited (AWI) announced that fine wool supply because of market demand.

The key drivers for fine wool (19.5 micron & finer) demand at retail - economic growth, rises in consumer incomes and spending and fashions trends - have all been particularly positive for fine wool over the last two years.

Across the major fine wool retail markets, China, US and to a lesser extent the UK, have all underpinned demand for fine wool, while growth in apparel sales in Western Europe, Japan and South Korea have all been relatively patchy.

On the supply side, 2004/05 was a watershed year for Australian fine wool production and exports. Fine wool production is estimated to have reached a record 154 mkg greasy, with the growth in superfine and ultrafine tested volumes extraordinarily strong.

Australian fine wool exports to China virtually doubled that to Italy and for the first time, total Australian fine wool exports reached over 100 mkg clean in a season.

For the 2005/06 season, while prices are generally expected to remain subdued through to the March 2006 quarter, recent underperforming countries, Japan and South Korea, are expected to provide a boost to fine wool demand in calendar year 2006.

Also helping to provide some supply relief to the fine wool segment, Australian fine wool production is forecast decline by 5 per cent in 2005/06 year-on-year due to an improvement in seasonal conditions in NSW and WA.

Given this predicted lower supply and some on-going growth in fine wool demand, a mild improvement in fine wool prices is forecast by the Woolmark Market Intelligence Group, perhaps beginning in the second quarter of calendar year 2006.

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