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Wool Market Looks to Improve in 2021, But Challenges Remain

Australian Wool Innovation (AWI) chairman Colette Garnsey told the organization’s annual general meeting that wool still has a bright long-term future after a difficult 2020 for many growers.

AWI is owned by Australian wool growers and is the industry’s research, development and marketing company. It is also the owner of the Woolmark brand.

“Following on from the devasting summer bushfires, COVID-19 and the worldwide governments responses to contain it, 2020 is like nothing the wool industry has faced before,” Garnsey said. “Our key markets, from China to Northern Europe, have at various times been on the frontline of the pandemic, domestic and global supply chains have been severely disrupted and demand for our fiber has fallen heavily due to consumer demand change driven down by Covid-19.”

She said all of these factors have been reflected in the wool price, which, after a significant decline this year, is seeing “something of a rebound on the back of some solid underlying support we hope will be sustained.” For the week ended Nov. 20, the benchmark Eastern Market Indicator was down 24 cents to $8.45, AWI reported, after an 18 cent pop to to $8.69 a week earlier, but down from $11.11 in January.

“Substantial rainfall across south-eastern Australia in recent months has been a blessing for many woolgrowers after years of drought,” Garnsey said. “[However], wool producers in the West remain in severe drought and any benefits the weather might have brought our industry have been more than offset by the impact of COVID-19.”

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Garsney told woolgrowers at the meeting that the effects of the drought, the lower wool prices and other factors has resulted in a 45 percent fall in AWI’s revenue in 2019-20.

She said there remained a significant uncertainty in the global industry in the short term, particularly with large parts of Europe and North America heading back into lockdowns as they head into winter. However, she said “the longer-term tailwinds for our fiber are undiminished given its sustainability, traceability, wearability and durability.”

AWI CEO Stuart McCullough told the meeting that demand for Australian wool overwhelmingly came from one place in 2020–China–although AWI was also pursuing other markets.

“China is Australian wool’s biggest customer for many reasons, including the size of its population, climate and growing affluence,” he said. “They are a unique partner from a manufacturing point of view, but also from a consumption point of view, as they are now consuming half of the Australian wool clip they buy domestically. In terms of major economies to recover from the disruption due to Covid-19, China is the clubhouse leader, by a long way. We are making the most of that with our current marketing campaign, which is creating demand for wool and importantly leading to extra sales.”

McCullough said AWI has also pursued an “Emerging Markets” strategy for eight years that has seen an increase in processing and consumption of wool in places including India, Vietnam, Bangladesh and Sri Lanka.