Monthly Market Reports

August 2012

30 August 2012

This month, we will continue the investigation in the European market, focusing on the changes up ahead and implication for the wool industry in Europe. We will also cover current industry trade news, outlook for cotton and wool imports for China.

Changes up ahead

Going forward, the implications of age-income demographic changes within UK, Germany, France and Italy are profound, for the fibre of our nation. The graph below shows the changes from 2011 to 2016, the bubble size indicates the number of people that falls into each age category, the X-axis shows the population growth and Y-axis illustrates the income growth.

On average in the next five years the Big Four consumers’ income is forecast to increase by 10%, significant increases will be seen in the 50+ age bracket, with 65+ set to increase by 14%. At the same time population growth in the 50+ categories will magnify the purchasing power of these consumer groups.

The trend in ageing population and rising income for the Big Four consumer markets is going to deliver a much needed drive for apparel wool demand in Western Europe. The increase in demand will be mainly driven by the increase in disposable income, rising number of luxury consumers and consumer market as a whole trending towards quality rather than fast fashion. In general a person’s income rises with their age, for example a 55-year-old is expected to have a higher disposable income than a 20 year old. Also younger consumers tend to focus on fast fashion while older consumers place a stronger emphasis on quality and luxury.

Therefore, the fundamentals of the Big Four consumer markets have already set into motion, looking beyond the currently volatility in Europe, there is certainty for our luxury fibre – Merino wool.

Spring/Summer 2013 yarn trade fair

The European yarn spinning industry has had a second consecutive year of positive results. Italian yarn sales in particular rose by more than 16% in 2011, despite a slight slowdown going into the fourth quarter of the year. The success of the past two years has been possible because of the industry’s concentration on high quality yarns for the luxury market as the top end of the market has proved to be resilient during the Global Financial Crisis. One major market to have emerged during the past two year is China. After being seen solely as a competitor, China has now become an important customer for the luxury market.

New season for cotton

Report released by International Cotton Advisory Committee (ICAC) shows:

  • Cotton prices likely to remain low
  • Stocks jumped by 47% to 13.6m tons in the 2011/12 season
  • Cotton production to fall by 9% to 24.7m tons in the new season

Wool imports for China

Reports coming out of AWI China office indicate, China’s raw wool imports from global sources in July reached 22 mkg, down 8.3% month on month and 3.3% year on year. From January to July, raw wool imports totalled 183.9 mkg, down 6.9% year on year, and import value reached USD1.69billion, down 2.6% from last year. The chart below shows China’s global imports in kg in the first seven months of 2011 and 2012.

For the first half of 2012, China’s global imports of raw wool (greasy, scoured, carbonized and noils) reached 161.89 mkg, down 7.4% compared to the first half of last year. Import value amounted to USD1.5 billion, down 1% year-on-year (yoy). Major sources of imports are shown in the graph below for greasy, scoured, carbonized, noils, and wool tops as well.

China’s greasy wool import total at 135.29mkg, down 6.95% yoy; imports from Australian down 8.34%, from New Zealand down 1.53%, from South Africa up 155%, from Uruguay down 47.8%, and from Spain down 9.4%. It is worth noting, the chart above shows Australia wool accounts for 75% of Chinese wool imports, while New Zealand (13%), South Africa (8%), Uruguay (2%) and Spain (2%).

An analysis of the fleece wool market from July 2004 to June 2011 has been conducted by Elizabeth Nolan from University of Sydney. The report looks at what factors contribute to the variation in the price of wool over this period and the cent per kilogram premium or discount due to variation within specific fleece traits. View the report here (pdf 2.8Mb).

A summary of the report will be conducted in the near future and will accompany the full report.