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Beyond the Bale : March 2017
What has pushed the prices of fine micron wool so high? Aussies say “China”. However, Chinese ask me “Are Aussies intentionally trying to push the market up?” I tell them no existing Australian exporter is in a position to manipulate the market. We have seen quite a number of disastrous cases both in Australia and China of companies which had tried and failed – with some Chinese players even incarcerated after attempts to do so which eventuated into huge losses. Last week, I talked to a worsted vertical mill who buys wool from all origins. The quantity of 16.5 micron fleece wool they have bought this season has matched the total quantity of the past five years combined, mainly for local use. After talks with a couple of worsted and carding clients, I would like to extend the following reasons. 1. THE GENERAL TREND IS GOING FINER IN MICRON AND BETTER QUALITY. When I started my agent business in 1995, the main microns I sold were 24.1 average and 22.6 average fleece. After the year 2000, 22.6 micron and 21.0 micron became more popular, much less 24.1 micron. For the past five or six years, 21.0 micron has the most quantity in my order book among all Merino fleece, while 24.1 micron has almost disappeared. From this season however, 19.5 micron has the tendency to replace 21.0 micron at the top. With living standards improving and labour costs climbing in China, the demand is going finer and the manufacturers can also find better profits in higher quality products. 2. CHINA RAILWAY UNIFORMS ABSORB GOOD QUANTITY OF 18.5 MICRON AND FINER. When the Chinese railway uniforms finished all designs last March, the price gap between greasy 17.5 micron and 21.0 micron was within 1 USD/kg, so why not use finer and better quality wool? When the tender details were shown, the whole industry was surprised that they had specified finer micron wool than previous uniforms, with 18.5 micron and 17.5 micron playing the main role. All the tenders for caps, garments (coats, suits, sweaters, shirts), belts and shoes were open to the public and closed in early May. The Australian wool prices went up quickly after the tender, so all the confirmed prices could not work. Months later, another tender took place to re-find suppliers with renewed biddings. This uniform influence on the wool prices is still there as the garment makers have not finished sourcing all fabrics yet. 3. WHEN THE DEMAND OF FINE MICRON COMES, AUSTRALIA IS THE ONLY SUPPLIER, THUS THE RISE IS QUICK AND SHARP. China may get a small quantity of 17.0-18.5 micron from New Zealand or South America, but Australia is the only country that can supply quantity. Australia has no competitor in 18.5 and finer microns. If we look at 16.5 micron FNF greasy price at 27 USD/kg in 2011 (AUD:USD rate was 1.05 at that time), it can be said that the current prices being paid for fine microns are not ridiculous seeing today’s price is less than 17 USD/kg. 4. DOUBLE FACE IS A BIG CONTRIBUTOR IN WOOL CONSUMPTION. Double faced fabrics (which use carded wool) keep selling well in China this season. These use 70% more wool than single faced fabric. Manufacturers have all different ways to make these fabrics, but all use carbonized wool, open tops, fleece tops and/or cashmere – while some lower priced fabrics blend 20-50% synthetic fibres. These fabrics have not only pushed all the carding prices higher, but also fine fleece and pieces prices as more and more open top makers break the long tops into shorter after combing. With all the 17.5 and finer orders I have sold this season, I estimate close to half of the clean weight goes to carding clients. Because of smaller availability, the shorter (58HM and under) wool is more keenly sought than the longer lengths in 17.5 micron and finer. Crossbred wool is still suffering, especially 28.8 micron and broader. We have not seen any signs of improvement in demand in the coming six months. The traditional users are now busy making synthetic tops, carrying heavy stocks of crossbred in greasy, tops, yarn or fabrics. They made good profit in the past ten or 20 years, so most of them are in a position to hold the stocks. Many Chinese say 2017 is a carbon copy of the year 2011. Those who have booked good stocks of greasy fine wool are happy, but those who have oversold wool tops to their customers for future months are having headaches. After all, we should all have a big heart, then all things are small. China-based wool agent Lizzy Shen provides in this article, written especially for Beyond the Bale, her latest frank and informative insights into the Chinese wool industry, from an insider’s perspective. As a wool agent, Lizzy represents many Australian exporters and constantly assists them to make substantial sales each year into Chinese textile markets. She is extremely well respected throughout the wool supply chain both in Australia and China. AN INSIDER’S VIEW ON CHINA 52 MARKET INTELLIGENCE Wool agent Lizzy Shen
In the Shops - March 2017