The proportion of Uruguay's export of tops to China has decreased from the previous 47/52% to 32.9%, with a total export volume reaching 21,200 tons. China remains the primary export destination for Uruguay's wool tops. Italy and Germany's export of tops to China accounts for 33%, while exports to other European countries have increased. This proportion once reached 50%, which is rare in recent years.
However, we all know about the uncertainty in wool prices, and currently, the uncertain factors in Europe and the U.S. economy still exist.
The wool exporters we understand are optimistic about the demand for wool, believing that the overall demand will increase.
In line with the AWI report, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) also forecasts that the Eastern Market Index (EMI) for Australian Merino wool will remain around AUD 12.
Mr. Curtis believes that it will take some time for the supply of wool products to increase; and with the continuous growth of the world population, the demand for food, clothing, and housing will also increase accordingly. Consumers seem to be increasingly supportive of wool. Mr. Curtis claims that part of the reason for this "intimate wool sentiment" surge is due to the wool campaign.
Mr. Olivier Segard of Segard Masurel France believes that now, the demand rate for apparel wool in the European market has slowed down. Nevertheless, retail wool seems to be more than before. This might be the reason why wool prices have not plummeted significantly in recent months. Also, the situation now is different from the end of 2008; wool inventories are not excessive. Due to the constant basic demand for wool, the trade in raw wool and wool semi-processing will not cease.
The news of stable market demand in China is recognized by New Zealand Wool. After his visit to China, Mr. AlRoss said that there is an oversupply in China’s carpet yarn production. This demand mainly comes from the domestic Chinese market, as its carpet exports account for less than 10%. Since wool carpets are sold as luxury items, the demand for luxuries in China has not been affected by the slow economic development and the financial crisis in Europe and America. Mr. AlRoss said that this demand is very large, and many manufacturers have even shifted from hand weaving to producing carpet yarn to meet market demand. "The investment in new equipment is quite substantial, adopting the latest technology from Italy, Belgium, and the United States, so the quality of finished products has greatly improved."
"New Zealand wool is positioned as a high-end raw material for woven carpets, and the continuous growth of China's luxury goods industry, hotel industry, and recent residential industry helps stimulate the growth in demand for New Zealand wool," said Mr. AlRoss.
Mr. Segard pointed out that due to China's increasing demand, wool prices have remained at market levels so far, but we really do not know how long this can continue. The uncertainty of the global economy will eventually affect the demand in the Chinese market. However, when overall confidence recovers, we will again see a healthy growing hybrid wool market.
So far, the Chinese market has accounted for 48% of New Zealand's wool exports this year.
The Economist Intelligence Unit (EIU), a UK-based economic intelligence provider, suggests that the average selling price of (Merino-type) wool garments for the 2011/12 season should be around AUD 12.32 and will remain above AUD 10 until the end of 2013.
"This year's wool production is about the same as last year," he said, "Given the excellent weather conditions this year, the quality of wool is expected to improve."
Uruguay's largest top-making company, Lanas Trinidad, feels optimistic that next year the market will become more 'rational'. Mr. Pedro Otegui said that for the 2011/2012 season, Uruguay will start with 'zero inventory.' "There will be no inventory for wool producers, processors, or exporters, and other wool-producing countries also have no carryover inventory. Wool buyers have been holding a wait-and-see attitude over the past few months and thus do not have significant inventory either."
The situation with carpets and indoor wool products is slightly different. The markets in Europe, the U.S., Australia, and New Zealand are extremely quiet. Wool demand is decreasing, and alternative fibers are gaining more attention, Mr. Segard said.
Martin Curtis of Curtis Direct UK commented that we expect gradual improvements in the UK and US economies in 2012. The economies in China and the Far East will continue to grow at a rate slightly below double digits, while the European economy will experience a series of fluctuations. There has been a significant decline in wool production in the UK, New Zealand, and Norway, as these countries are major producers of high-quality crossbred wool, leading to a supply shortage in wool.
Mr. Segard believes that the long-term demand for wool will continue, but competition pressure from other fibers will also increase. Wool producers and the wool industry need to promote and publicize extensively.
As a member of the Executive Committee of the International Wool Textile Organisation (IWTO), Mr. Segard has witnessed IWTO's dedication to the global wool cause and its efforts in coordinating the development of the wool textile industry in member countries. However, there is no free lunch, he said, and IWTO sincerely welcomes external funding support. Some political actions in the southern hemisphere wool-producing countries are also conducive to uniting the entire wool textile industry.
Repeated fluctuations, unpredictability, difficult to control, exciting, full of challenges—these are the characteristics of wool prices described by wool traders, exporters, and processors. The Australian Wool Innovation (AWI) market intelligence report predicts that in the near future, the Eastern Market Index (EMI) will remain around AUD 12.