Rough ride for wool market to continue

Rough ride for wool market to continue

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Peter Scanlan (left) and Steve Noa from Scanlan Wools returned from the Nanjing Wool Markets Conference with messages for WA woolgrowers.

Peter Scanlan (left) and Steve Noa from Scanlan Wools returned from the Nanjing Wool Markets Conference with messages for WA woolgrowers.

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Expect more volatility from the wool market for some time yet was the message WA wool trader representatives brought back from the 31st Nanjing Wool Markets Conference for woolgrowers.

Aa

EXPECT more volatility from the wool market for some time yet was the message WA wool trader representatives brought back from the 31st Nanjing Wool Markets Conference for woolgrowers.

Scanlan Wools founder Peter Scanlan and wool buyer Steve Noa were two WA wool trader representatives who attended the recent two-day conference in Qufu, Shandong Provence, China.

This year the conference was hosted by Ruyi Technology Group, one of China's textiles and clothing manufacturing giants which also controls historic Australian wool trader Lempriere, is major shareholder of Queensland's Cubby Station cotton enterprise and owns a number of luxury European apparel brand names.

"Their (Ruyi) showroom is quite spectacular and there's lots of brand names on its walls that you never thought you'd see in China," said Mr Noa of this year's conference hosts.

While he and Mr Scanlan did not disagree with an assessment in last week's Farm Weekly by Australian Wool Innovation (AWI) conference attendee Scott Carmody that stocks of greasy wool are running low in China, they believe that is only part of the outlook for WA wool.

While greasy wool stocks are low, there is however an oversupply of woollen fabrics - particularly the double-faced fabric that has driven record Australian wool prices for the past three seasons due to the popularity in China of women's reversible winter fashion coats - and of high-priced but not particularly high quality knitwear already on the market, they said.

Mr Noa said fashion trends for the coming winter in China would determine whether demand will clear the fabric backlog and whether the innovative double-faced fabrics in particular, which use a lot of short wools, feature as a fashion statement for an unprecedented fourth winter.

"Unfortunately there's a lot of inferior quality double-faced fabrics now," Mr Noa said.

"When it became so popular everyone starting making it, including a lot of low quality mills and there were a lot of complaints from the quality producers about the amount of inferior quality cloth on the market giving it a bad name.

"It's been good for WA woolgrowers and still has potential, but we'll have to wait and see."

Similarly, the oversupply of finished knitwear and wool garments in China could be erased on November 11, depending on how successful the 11th annual Alibaba online one-day sale is, Mr Noa and Mr Scanlan said.

While November 11 is Remembrance Day in Australia, in China it is Singles Day, a shopping festival aimed at young people and has been adopted by online marketer Alibaba as the date for its annual sale, which last year grossed the equivalent of US$30.8 billion for the day.

"November 11 is crunch day - coats, jumpers, you name it, it'll all be going up online and how much wool material is moved on that day will tell the story going forward," Mr Noa said.

"Basically, the take home message (from the conference) was that volatility is really hurting the industry in all areas - from fabric makers to woolgrowers," he said.

"The trade war (between the United States and China) set it (volatility) off and confidence disappeared quickly.

"There's no doubt everyone thought wool was a bit expensive at the top - it wasn't being absorbed as much into new product, into blends, because it was considered too expensive.

"But once it started falling no one knew where to jump in until it got to the point where we had a very small sale and the market turned, then it went up too quick and a lot of people got confused.

"People sold stock right at the bottom and effectively got stung twice."

In WA that volatility saw the Western Wool Centre hold its smallest sale on record and the Western Indicator make its biggest one-day jump one week apart.

"There's a lot of talk about the European market and particularly the American market for wool looking a bit grim," Mr Noa said.

"The domestic Chinese market is also a concern, while China claims a 6.3 per cent GDP (Gross Domestic Product) annual growth, the textile sector is not considered in that at all.

"Exports of processed wool product out of China are down 5pc year on year and domestic wool sales are down 6.2pc year on year there, we were told at the conference.

"But it's not just wool, it's textiles generally, even synthetics are down 12pc year on year and cotton has crashed.

"For woolgrowers it means they will have to get used to volatility and there has to be a lot more work done on the offering.

"There has to be orderly marketing.

"Growers have basically got to spread their wool out, they can't all put it up at one time.

"If they've got 100 bales, divide it by four and put it out over six months.

"If we could put up 30,000 bales (nationally) every week our customers could be confident," he said.

Mr Scanlan said a message for WA woolgrowers he picked up was that more of them needed to return to producing 21 and 22 micron wools.

"There's too much fine wool on the market, if woolgrowers don't produce the basic 21 and 22 micron wools, they'll be replaced in the market by synthetics - it's as simple as that," Mr Scanlan said.

Apart from Scanlan Wools and AWI, Peter Morris Wools, Fox & Lillie, Techwool Trading, Endeavour Wool Exports, United Wool Company and Australian Merino Exports sent representatives to the Nanjing Wool Markets Conference and Westcoast Wool & Livestock was represented by its local agents.

The conference is held every second year.

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