SHORT-term pain from China's restrictions on electricity usage could produce long-term gains for wool and a greener future, said Quality Wool managing director Mark Dyson.
Earlier this month, the Chinese government cut electricity usage by 30 per cent, prompting mills to reduce wool purchases while they monitored the impact.
The result was a 31pc drop in the benchmark Eastern Market Indicator (EMI).
Speaking to an audience of more than 80 woolgrowers at a Quality Wool 30th anniversary function at Jamestown in South Australia recently, Mr Dyson said he believed there was no immediate cause for concern for the wool industry despite the heavy impact on other Australian export commodities.
"Where wool is somewhat insulated from this is that our other commodities (coal, beef, barley, wine) are consumed within China and don't generate any export income," Mr Dyson said.
"With wool, they are using 80pc for their own domestic needs, but then re-exporting 20pc - and this is during the challenging COVID-19 landscape.
"China has also increased its tariff-free quota of Australian wool under the free trade agreement (FTA) with 5pc annual increases until 2024, which by then will total more than 44,000 tonnes per year, so the short-term outlook is good.''
Mr Dyson also said the Chinese wool industry was one of the country's major employers, while the well-established nature of the wool supply chain meant it was unlikely to move overseas.
With China being one of the world's leading emitters of greenhouse gas, he said the recent power cuts, triggered by an enormous surge in the price of coal in mid-2020, would be a game-changer in global efforts to create a more sustainable future.
"By reducing their reliance on fossil fuels, they're moving more towards sustainable green renewable energy, which coincides with the emission reduction goals the world is asking for," he said.
Meanwhile, Mr Dyson said the continued growth of the knitwear market was the reason for excellent prices for skirting and carding wools.
"The popularity of active wear and next-to-skin garments continues to increase, especially with workplaces around the world moving towards casual attire or people working from home because of the pandemic," Mr Dyson said.
"Hence the reason why the knitwear and semi-worsted markets are very good in comparison to the demand for fleece wool, which is traditionally used by the suiting market.''
Mr Dyson expected the positive wool market conditions to continue through to the Christmas sales recess, with good demand particularly for 19.5-micron and finer types.
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