Australian wool sector rides evolving market trends

Australia's pillar wool sector is reaping the rewards from record-high prices as it rides on consumption upgrades and other strengths in its biggest market, China, according to latest figures.

The Australian wool market hit its strongest level in seven years, reaching an industry index of nearly A$20 ($14) a kilogram by the end of May, according to Australian Wool Innovation, the main nonprofit group providing research for the sector.

AWI said the rise "marks one of the strongest periods of sustained improvement seen in recent years".

Most Australian wool is high-quality fine and superfine fiber shorn from merino sheep, with the raw material exported to China for processing into wool apparel products like sweaters, suits and coats.

After several years trading at levels many considered unsustainable for production, the Australian wool market is "increasingly responding to tightening supply, reduced sheep numbers and growing recognition of wool's natural fiber credentials", AWI said.

"At a time of international uncertainty, the wool market is bucking the trend up to levels not seen since May 2019," its chairman George Millington said.

AWI highlighted the industry's strong start this year, with Australian wool production by volume for the 2025-26 season ending in January totaling around 156,000 metric tons.

China remained the dominant destination, accounting for 88.4 percent of total exports, it said, with industry stakeholders pointing to price increases supported by downstream demand.

"When wool sells well in China, the effects ripple all the way back to the farm gate," AWI said, adding that strong sales during major Chinese online retail events like the Double 11 peak shopping period in November provide "a clear snapshot of how merino wool is performing in a market that remains central to Australia's wool industry".

Andrew Woods, market analyst at Independent Commodity Services, which focuses on the raw wool market, told China Daily that an underlying fall in wool supply in the past decades worldwide has coincided with a rise in demand.

"The (raw) wool goes to China because the machines are there," said Woods, who is also an analyst at agricultural market analysis platform Mecardo.

Advances in processing, such as a move to use wool in blends with cotton, allowing it to be used on cotton machinery, have also contributed to the developments in the sector, he said.

"So you've got two things going on — a gradual lightening of wool in a range of uses, and at the same time, you've got supply, stocks being run down."

Many wool producers are turning to stock retention amid rising prices, "causing a compounding effect" by mid-June, according to industry service provider Meat and Livestock Australia.

A low overall supply of merino lambs remains the largest contributor to their prices amid a sharp lift in wool prices since September 2025, MLA market information analyst Alex Fry said.

Buying patterns are also pointing toward sustainability, with most consumers citing environmental performance as a key factor in their purchasing decisions, according to AWI.

The trends "align closely with what Australian woolgrowers invest in … responsible land management, animal care and natural fiber production", AWI said.

Similarly, Woods said supply chain developments in the sector include the adoption of quality or "responsible wool" standards, which help verify that the product comes from farms with progressive land management and sheep welfare practices.

Contact the writers at xinxin@chinadaily.com.cn