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Wednesday, October 09, 2013

Raw wool purchases by the major processing countries on the rise

By Chris Wilcox  |  Source: ABS, Cape Wools, FLA, Beef + Lamb NZ, SUL

Key points

  • Raw wool exports to the major processing countries lift strongly
  • Strong gains by Italy and the Czech Republic lead the way in 2013
  • Recent sharp increase in purchases by India
  • All major exporters recorded increases
  • Australia’s exports have lifted the most in recent months


2013-10-09 Raw Wool Purchases By The Major Processing FIG 1

2013-10-09 Raw Wool Purchases By The Major Processing FIG 2

The major wool processing countries have ramped up their purchases of raw wool after a year of low demand. This may herald a continued improvement as long as orders for finished products pick up.

The latest data from the major wool exporting countries (Australia, New Zealand, South Africa, Argentina and Uruguay) shows that raw wool demand by most of the world’s major wool processing countries has increased in 2013. For calendar year 2013 to August, raw wool purchases from these exporting countries increased by 10%, led by strong lifts in purchases by Italy, the Czech Republic, China and a range of other countries (see figure 1). The 8% increase in purchases by other countries is of interest, as it includes purchases by two new entrants, Egypt and Malaysia, where combing mills have been established in the past year.

As can be seen, raw wool buying by India (the second largest export destination) has lagged the trends in the other major processors due, in part, to a combination of weaker demand from its major export market of Europe and a sharp fall in the Rupee earlier in 2013 which made wool purchases more expensive. However, there are signs that this has changed in recent months as Europe begins to recover and with the Rupee stabilising, mills appear to be restocking.

As figure 2 shows, raw wool exports to India for the first two months of the 2013/14 season increased by 16%, a faster rate of increase than China. There has also been very strong growth in purchases by the Czech Republic and by Italy. Overall raw wool demand has increased by 12% in the first two months, and the total export volume is ahead of three of the five recent seasons.

All of the major exporting countries recorded increased exports in the first eight months of 2013, with the strongest increase (+20%) recorded by Uruguay and South Africa. By comparison, Australia’s exports increased by 7%, the lowest increase for the five countries. This has changed in the opening months of the 2013/14 season, with Australia’s exports up by 16%, the largest increase of the five countries.

What does this mean?

The increase in raw wool demand so far in 2013, and in particular in recent months, is very encouraging for the rest of the 2013/14 season, as long as these increased purchases are matched by increased orders for finished products (both clothing and interior textiles). If they are, then wool prices should lift.

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