Market looks to 2013 for increased demand

'The increase in prices in the last couple of weeks is mostly due to virtually no stock of greasy wool being held by Chinese processors’, says Robert Wang China Manager for AWTA based in Melbourne.

Processors in China are working on a week to week supply basis. Mr Wang believes that from April next year there will be an improvement in wool demand from China and he attributes this to two main reason; the new government will be well in place in China after the mid November Congress and no doubt it will push for further stimulus to rejuvenate stagnating areas in the Chinese economy. The second reason – the USA economy is on an upward trend with manufacturing consistently improving as well as job creation on the upswing.

According to wool export data released by CWTA the export of Chinese wool tops to countries in Asia, including Japan and South Korea as well as the USA has not reduced significantly in the last 12 months, whereas the Chinese wool processors have experienced a significant drop in exports into Europe. But according to Robert Wang although there is a build up of wool top stocks in China it is not that significant and with some increase in demand from Europe those stocks will be depleted very quickly.

With the US election over, it is hoped that the economic situation in the US should also improve. The latest manufacturing data as well as retail consumption data shows considerable improvement in the wellbeing of the US economy.

It should also be pointed out that if President Obama wins with 3 additional Congress seats it would give him a clear majority to push through economic stimulus he was unable to achieve last year as blocked by Congress.

In the event that Romney wins the presidency – this would also be good news on the economic front, as businesses in USA would be happy with Romney economic policies of promised less government, less taxes and less government regulations.

According to a recent report published by AWI the US Census Bureau released advanced estimates of US retail sales for September. Retail sales were up 1.2% from August 2012, and up 5.3% year-on-year. Clothing retail is one of the better performing sectors – calendar year-to-date sales of clothing and clothing accessories are up 6.1% compared to the same 9-month period last year, and home furnishings up 8.8%.

Mr Wang also believes that Europe’s economic woes have bottomed out and there are signs of stabilisation.

All of the above point to increased consumer confidence and will hopefully boost purchasing trends this Christmas. This should help the textile industry and therefore wool demand.

Increased demand would undoubtedly put pressure on the supply chain and as the supply of wool from most wool growing countries is in decline or static at best it will undoubtedly put upward pressure on wool prices.