By Chris Wilcox, Poimena Analysis | Source: Australian Bureau of Statistics, Australian Council of Wool Exporters and Processors
Australian wool exports surged in the first six months of 2015 because of a strong recovery in raw wool demand from China. This, however, masks the continued solid demand from a number of other countries during the 2014/15 season.
After being below year earlier levels for most of 2014, Australia’s wool exports have been on a cyclical upturn throughout the first half of 2015 (see figure 1). In the January to June period, Australia’s wool exports were 191 mkg greasy weight (19% higher year-on-year), worth $1.50 billion (31% higher). The total exports this year to June were the highest in both value and volume terms since 2011.
The strong recovery in wool exports so far in 2015 is directly linked to an enormous lift in exports to China. These were 26% higher by volume and 41% higher by value, totalling 146.8 mkg greasy worth $1.14 billion. This a record value of exports to China for the first six months of the year and the second highest ever volume of exports (only slightly below the levels in January-June 2009 when wool prices were substantially lower than now).
While the increase in Australian wool exports is largely caused by China’s increased demand, this has been supported by a solid level of demand from other destinations. In aggregate, export volumes to the other destinations were 1% higher than for the first six months of 2014, while the value of Australia’s exports to these countries were 8% higher. As a result, exports to these other destinations in the first six months of 2015 were at the highest level since 2011 in both volume and value terms.
As figure 2 shows, China accounted for 75% of Australia’s wool export volumes (on a greasy weight basis) for the 2014/15 season, followed by India, the Czech Republic, Italy and South Korea. This is a higher share than the 73% that China held in 2013/14 but lower than the 77% record level in 2012/13.
The very strong lift in wool exports China is very welcome. It has come as the result of much lower raw wool purchases by China in 2014 as it ran down excess stocks in its wool textile pipeline. Of equally good news is the solid increase in exports to other destinations for Australia’s wool. Given that exports to China were at or near record levels for the first six months of a calendar year, the question is whether China’s wool textile industry can maintain its demand in the next few months as the new season’s wool clip comes onto the market. While there are no signs yet of a weakening in China’s demand, a concern is that stocks within China’s industry could be building up.
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