Australia and South Africa enter the annual winter auction recess this week with their wool markets on a firm note, providing a glimmer of hope that when auctions resume in August things may be a little better.
In both countries, wool prices rose by 1.8 per cent across the selling week last week as buyers moved to fill their admittedly meagre orders and purchase enough stock to cover the three-week recess.
Superfine Merino fleece saw the biggest gains, with increases of between 40 and 70 cents a kilogram.
A bit of a ‘dead spot’ appeared in the bulk categories of 18 to 19-micron wools, with volumes up and demand a little more uncertain – which led to more modest gains of only about 5/kg.
Medium Merino, 20-micron and coarser types had better competition and prices for this segment were 30 to 50c/kg higher.
Knitwear again continues to provide a slightly better outlook than the worsted market for fleece, so pieces, bellies and other knitting types – particularly at the finer end – closed up by 20c/kg or more last week.
Crossbred lines ‘sat and watched’ proceedings and closed unchanged for the week, while the carding market was all over the place – depending on yield – but, overall, ended the week unchanged.
In no uncertain terms, 2020 to date has been a shocker for the wool market.
But in the cold light of day, the current wool price is no surprise.
A drop in greasy wool prices of 36 per cent in US Dollar terms for the season almost directly correlates with a drop of clothing exports from China of 33 per cent, and a decrease in clothing consumption by as much as 38 per cent in countries such as Japan.
As Chris Wilcox illustrated in the weekly newsletter from the National Council of Wool Selling Brokers (NCWSBA) last week, Japan’s retail sales declined the most in 2020, followed by the UK with 29 per cent and China at 26 per cent.
But Germany can hold its head up, with an increase of 1.4 per cent.
In very simple terms, during the first six months of 2020, consumers stopped shopping because they were either concerned about their financial situation or could not physically get to the shops to buy goods.
It is, after all, a global pandemic – and so there has been nowhere to hide from the retail shock, except maybe in Germany.
The depth of the spread of the economic crisis, and the severity caused by locking people in their homes for a couple of months, has hit the wool industry – and many others – like the proverbial freight train.
Like many other commodities, the wool textile industry was highly leveraged and very dependent on consumer confidence.
The industry had been evolving quite well to meet the trend of casualisation of work attire, and developing new product ranges in the athletic and leisure sectors.
But the global shutdown of consumer activity at a retail level, with a drop of 30-odd per cent, dwarfed the 19 per cent drop in Australian wool exports – so the relief valve was always going to be price.
The good thing is, many of the changes or adaptions made in the past 10 years will enable the rebound to be smoother and quicker.
Unlike the industry back in the late 1950’s or the early 1990’s, the Australian – and global – Merino wool industry is much smaller and produces a product that the textile chain and the retail industry wants.
We no longer produce large volumes of scratchy, coarse fibre.
Wool is now a well-measured, certified soft, fine, strong fibre that can be worn next-to-skin and is produced by a dedicated producer who is able to be verified as sustainable – and traced from farm gate to retail shelf if need be.
The building blocks for recovery are in place.
That is not to say that the recovery will definitively begin in August, although refilling of the pipeline will probably see a solid start to the new season.
The government stimulus packages being dished-out across the globe will have a positive effect on consumer activity, when communities get the coronavirus under control.
Other forms of stimulus, such as the recent police uniform order in China which will soak up 1000 tonnes of fabric – or 8000 bales of 19 to 22-micron greasy wool – will help the recovery get started.
The bigger influences are likely to be environmental and wellness concerns of consumers.
While it is difficult to see a rebuild to pre-COVID-19 levels for sales of the traditional business suit, consumers are already emerging from lockdowns with a renewed focus on doing things better, caring about the natural environment and wanting to feel good about what products they buy.
Whether this is buying a garment that won’t sit in landfill for the next 50 years, or a carpet that will not burn quite so readily, wool has the building blocks in place.
COVID-19 has shown us a glimpse of how the planet can look with a bit less pollution and a bit less waste, and there are people in just about every country getting back out and marveling at their natural surroundings again.
A growing appreciation of clear skies, clean water and less busy places predisposes a consumer towards natural fibres.
The marketing campaigns of many woollen retailers in the pre-pandemic world already focused on this aspect of life, so nothing new has to be developed – it is already in place.
This means that in the longer term, the wool industry is well positioned and prices will recover – it is just a matter of when we start to see this effect in the auction room.
There will probably be some pressure as the traditional spring flush of wool comes on to the market.
Although, there is a small chance this could be offset if mills that are currently sampling their yarns and fabrics can secure garment orders for the pending 2020-21 season.
Futures prices are indicating that current prices should at least hold for the remainder of 2020 and into the first half of 2021 as a worst-case scenario.
But with encouraging signs of an uplift in consumer activity from those countries which have allowed their citizens back into shops, we may be able to resurrect things – or start the journey at least – on this calendar side of Christmas.
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