THE Australian wool market enters the one-week Easter recess in a happy space.
Exporters have mostly weathered the shipping storm, for now. Hopefully, the recess will allow the dumping facilities and shipping lines to clear some of the backlog and re-establish some of their normal efficiency.
The market appears to have almost reset as it was earlier in the year with superfine types gaining the most attention, medium Merino wandering along in an upward direction, and a few crossbred orders keeping that sector moving along as well.
Overall the market closed 15c higher (US12c and Euro19c higher) AWEX's Eastern Market Indicator on A1300c. Everyone around the globe is very comfortable with that outcome.
AWEX's Northern Market Indicator closed up 13c on 1369c. The 17 micron indicator closed on 2118c, 18 micron 1828c, 19 micron 1282c, 19 micron 1365c, 20 micron 1285c, and 28 micron 530c.
South Africa has already closed for their Easter recess, and in South American growers have pretty much sold everything they harvested by now, except those who intend to store it until the rules or the government changes again.
Those growers in the Northern Hemisphere are only just beginning to see some sunny days and allow their sheep out of the sheds after a rather long cold winter, so for them shearing is still a couple of months away yet.
So as usual in April, Australia is the only source of fresh merino wool, and with India stepping up to the crease to provide an alternative market it will be difficult to see much downside to the current price level in the coming two months.
Demand in China is still restricted to the domestic scene in general as European processors and retailers seem to be either getting locked down again, or putting their foot in their mouth about the origin of some of their cotton and upsetting major customers.
Mills in China are generally busy with lead times at combing, dyeing and spinning beginning to push out to more than a couple of weeks.
Some mills are still struggling to wind up to full production again after the Chinese New Year as their workers have found alternative employment opportunities over the break, so new bods have to be found and trained up.
It seems that the labour shortages in the wool industry are not confined to the shearing sheds of Australia, but to some extent do exist right along the chain.
It seems that the labour shortages in the wool industry are not confined to the shearing sheds of Australia, but to some extent do exist right along the chain.
- Bruce McLeish, Elders
Dusty, noisy conditions in the early stage processing factories do not sit well with many workers expectations, nor do the repetitive, monotonous sewing machine operations in some large factories.
For decades the wool processing industry has been shifting around the world in search of firstly cheaper wages, but also more willing workers.
It was not all that long ago that a combing mill in Hungary was forced to bus in workers across the border from Slovakia because all the locals preferred to work in the Audi factory down the road, rather than in the wool combing factory.
Factories in China, and worker conditions have improved considerably over the past 20 years and these vacant positions will no doubt be filled eventually, but it does highlight the difficulties the industry faces all along the pipeline finding enough skilled workers who are willing to operate in the dry and dusty conditions that entail harvesting and processing the wool fibre.
Smaller niche operations in terms of processing do have some advantages, such as providing a different more varied employment opportunity. Perhaps this is where the industry will ultimately get to given that it is now pretty much considered a niche fibre by some.
By way of comparison, the world cashmere clip is about 6500 tonnes of pure cashmere according to the Council of Fashion Designers of America (CFDA) - and definitely considered a niche industry.
World wool production according to CFDA is around 1.1 million tonnes, so while the volume of wool grown and processed each year is dwarfed by cotton and the plastics, it is still a very large industry compared to cashmere.
But, chasing the dream of prices such as cashmere is something the industry will continue to do.
The fashion industry is becoming aware of the environmental issues in areas where cashmere is grown, and this, together with the obvious price advantage, is leading to more and more fibre substitution.
Superfine Merino is a very apt substitute for cashmere fibre in terms of processing performance, and has far better environmental credentials so hopefully the trend can last and keep pulling superfine Merino prices upwards.
Smaller retailers, some of whom manage their production through at least part of the process, will obviously have a higher unit cost of production, but being in a more discerning customer focused part of the market are generally able to charge higher garment prices to recover this margin.
Often this involves taking the customer on a journey, in the latest marketing nuance, or explaining more about the source of the fibre and its journey to the shelf.
When the target is to sell a hundred thousand garments or so it is possible to talk about which factories where involved, and even the people in those factories who made the garment.
When the sales target is measured in the millions of garments it becomes much more difficult to track the journey or individualise the story.
Retailers are increasingly demanding both source identification, and traceability along the production chain to enhance their social license and bolster their credibility with their customers. And when the European Brands and manufacturers emerge from their Covid induced lockdowns we can expect a further uptick in requests like this as they seek to re-engage with their de-hibernating customer base.
While many will consume too much chocolate during this period, some will enjoy a break, while others will push ahead searching for the next customer to take an order in the hope of keeping their stock moving through the pipeline.
Chinese domestic orders and some increased Indian activity will only be 'just enough' to keep the wheels turning.
If there is an uptick in Chinese export orders everyone would feel much more comfortable, but nobody can sell to a client who doesn't want to buy, so we may just have to be satisfied at this price level for now.
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