This month we hear from Jiang Yali, wool market commentator with the Nanjing Wool Market in China who gives an overview of the global wool market.

Transcription

1 January 2018 This month we hear from Jiang Yali, wool market commentator with the Nanjing Wool Market in China who gives an overview of the global wool market. There is no doubt that 2017 was an inspiring year as the fine wool price went up to break several historical records again and again. It was obviously a very good year for the grower, however it was also welcomed by Chinese domestic factories, as well as plush processing factories as relative special fabric prices also climbed. The question to answer is, can the demand for wool absorb the higher prices coming through the supply chain? An interesting story line is the low prices of broader wools, and whether it will influence a reshape of New Zealand s clip profile. Part I. Australian Wool Market Across the year of 2017, customers demand for wool products showed an upward trend, especially for double-faced fabric and fake fur products, which in turn boosted wool product innovation and increased the amount of fine wool being used. Wool processing factories never stopped their machines and global wool stocks went down, which caused the Australian wool price to soar through Merino wool was most affected, with most buyers coming from China and European countries. Table Australian Eastern Market Indicator (AWEX EMI) Yearbegin Yearend Max. Min. Ave. Ave. Year on Year 2016 AUD(ac/kg) % USD(c/ kg) % At the end of 2017, the EMI reached 1760 ac/kg and it was also the first time the EMI has broken through 1700 ac/kg. Compared to the same period last year, the wool price increased by 405 ac or 29.9%, this was the biggest increase since In the most recent three years, the EMI has risen 701 ac in total. The MPG of micron achieved their highest price. Additionally, this year was also the first that the wool value of trade broke through 3 billion AUD met a total offering of 1,919,447 bales, a turnover of 1,778,708 bales and a clearance rate of 92.7%. The top five buyers are as follows: TECHWOOL: 231,591 bales; FOX & LILLIE: 149,470

2 bales; TIANYU: 75,012 bales; PJ MORRIS: 71,666 bales as well as AUS MERINO EX: 64,716 bales. Graph 1. Australia EMI & AUD Exchange Rate of 2017 Part II. New Zealand Wool Market As the main export destination of New Zealand wool, Chinese demand turned to be the key point of New Zealand wool price. With wool usage in carpet and house products decreased, the broader wool price went down. As to Chinese domestic enterprises, they still have a relatively high demand for woollen fabric, yarn and wool top, which is possibly due to a large buy-in while the broader wool price is so low, hence this kind of demand may not be real. However, we have faith that the low wool price will inspire broader wool product innovation and thus bring us new demand. Table New Zealand Regular Spec. Price Index (cent/kg) Yearbegin Yearend Max. Min. Ave. Ave. Year on Year 2016 Fine crossbred wool % Coarse crossbred wool % Lambs %

3 Graph New Zealand Regular Spec. Price Index (cent/kg) The year 2017 met a total offering of 481,465 bales, a turnover of 373,958 bales and a clearance rate of 77.6%. The top five buyers are as follows: MASUREL: 95,485 bales; NZ WOOL SERVICES: 72,920 bales; FUHRMANN: 521,905 bales; JS BROOKSBANK: 43,150 bales and Ascot: 19,835 bales. Part III. South African Wool Market With a firm and strong demand for greasy wool and wool top from China and European countries, especially for good types and spec from wool top processing and yarn processing factories, the price continued an upward trend. Now Chinese greasy wool stocks have almost been digested in producing fake fur fabric, leading to the South Africa Cape Wool Indicator being much higher than the same period last year. Although the rand exchange rate increased, and left growers without the increased high local market price as thought, they still benefit a lot from the positive wool market. Hopefully this will in turn inspire them to continue to grow wool. At the end of this year, the combined index closed at rand/kg, an increase of 26.9% year on year. The total offering for the 12 months was 315,010 bales with a clearance rate of 97.5%. Graph 4. The Cape Wools Merino Index (Unit: Land/KG clean)

4 Part IV. China Domestic Wool Market Graph 6. Combined Index of Nanjing Wool Market (cent/kg) (Year on Year from Jan to Dec 2017) As the graph shows, the wool market had a more positive trend this year. Consumers passion for fake fur and woollen sport products increased steadily, wool product was more accepted by customers with affordable prices and high variation across product styles. Although Chinese demand for coarse wool was still not high and prices reduced, the downside trend is limited as we expected.

5 Table 3. A Subindex at the end of 2017 (cent/kg) TYPE Ave. Dec Ave. Dec Month on Month (Nov. 2017) Year on year (Dec. 2016) AUSTRALIAN GREASY WOOL % 19.14% AUSTRALIAN CHINA-COMBED WOOL TOP % 26.42% AUSTRALIAN CARBONIZE WOOL % 16.11% NEW ZEALAND GREASY WOOL % % NEW ZEALAND SCOURED WOOL % % NEW ZEALAND CHINA-COMBED WOOL TOP % -4.93% URUGUAY WOOL TOP % 5.25% CHINESE WOOL TOP % 14.25%

6 a. China Greasy Wool Import Graph 7. China Greasy Wool Import Volume Year on year (unit: million kg) From Jan to Nov 2017, Chinese total greasy wool import volume was million kg, an increase of 4.5% year on year. b. China Wool Top Export Graph 8. China Wool Top Export Volume Year on year (unit: million kg) From Jan to Nov 2017, Chinese total wool top export volume was 27.5 million kg, 2.4% down year on year. With an increased import number and decreased export number, we can say that more wool was digested by Chinese domestic demand, most likely due to double-faced fabric and fake fur product innovation. Wish you all a Happy New Year and good wealth. Jiang Yali, Nanjing Wool Market

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