Australian wool sector pins hopes on Chinese market

Australia's pillar wool sector is banking on the major Chinese market, riding on e-commerce and other consumer clothing trends, according to the latest analysis.

Many Chinese consumers still prefer natural fibers to synthetics when choosing between otherwise equivalent garments, according to Australian Wool Innovation, or AWI, the main nonprofit group conducting research for the sector.

Australia is a top exporter of apparel wool, mostly from the high-quality fine and superfine fiber of merino sheep, with the raw material exported to China, its largest market, for processing into products like sweaters, suits and coats.

Australian wool exports hit A$2.4 billion ($1.63 billion) in 2024-25, with the Chinese market taking up A$2.1 billion of the total, according to official data.

An industry campaign to further promote wool worldwide in the year ahead is putting the Chinese market at the forefront, including partnerships with major online retail platform Tmall.

Andrew Woods, a wool market analyst at business consultancy Independent Commodity Services, told China Daily that Chinese importers will welcome the recent stabilization of wool supply, driven by improved seasonal conditions in many Australian farming regions.

"China is the largest processing market for wool. Some of the products will be re-exported elsewhere or further processed within the country," said Woods, who is also an analyst at agricultural market intelligence platform Mecardo.

Faced with the latest trends occurring at the retail end, Australian producers will focus mainly on growing the raw material, he said. Wool price rises during the past 18 months have also outrun rises seen in oil-based synthetic fibers and plant-based fibers, according to his latest analysis.

"The big Chinese processors, they will want well-prepared merino wool. They can get that out of Australia, as long as it fits the desired demand and price levels," said Woods.

With demand for sheep meat up in markets like the United States and Europe — coinciding with lower flock numbers — rising lamb and mutton prices mean Australian wool producers may also pivot to meat production. Woods noted that sheep meat prices, relative to merino wool prices, are "at some of the highest levels we've seen".

"You've got a lot of pressure within the industry to transfer farm resources from wool production into sheep meat production. So for the same number of sheep on paper we'll have less wool," he said.

Oskar Mitchell, agriculture analyst at global agribusiness banking cooperative Rabobank, told China Daily that there has been an expectation that wool supply levels have bottomed out from the significant falls of the last few years.

Industry forecasts point to annual production declines of about 1.8 percent, compared with falls closer to the double digits in recent years, he said, with about 340 million kilograms of mostly merino wool produced a year in Australia a decade ago falling to about 250 million kg now.

Wool prices have also rebounded from depressed levels post-pandemic, most notably from last year, amid the reduced supply, he said.

"Australia is the world's largest producer of merino wool, which is used for apparel wear, so it's quite significant in terms of looking at the apparel market," Mitchell said.

While challenges from competing land use by meat producers and macroeconomic factors like inflation remain, stabilizing supply, coupled with trends showing Chinese consumer demand for natural fibers, offers bright spots for the sector, he said.

"All that helps paint a somewhat optimistic picture for the merino industry in Australia. Broadly, we're sitting in a much more optimistic place than we were looking at a few years ago."

alexishooi@chinadaily.com.cn