Sales resumes amid uncertainty about the effect of the downturn in the global economy on the wool market. The market indicator gained 14% during November and December on the back of strong demand from Chinese importers rushing to fill import quotas before year-end, and a weaker rand. It nevertheless still is 12% below the opening sale in August 2008.
With all 15 countries in the Euro-zone, the US and Japan now officially in recession and consumer confidence at a low, spending patterns, particularly on non-essentials like clothing, are expected to be affected.
Another factor that will negatively impact on prices is wool’s price relative to other fibres. Prices of competing fibres, particularly synthetic fibres, have decreased more sharply than wool prices. This may compel manufacturers to switch to cheaper fibres or to “downgrade” pure wool products to wool/synthetic blends.
Also of concern is the slow-down in China’s economy as export demand drops. When all these factors are taken into account, the wool market is expected to face a few difficult months.
On the other hand, concerns about possible supply shortages following the expected 6% drop in Australian production to 375 million kg, the lowest level in decades, may support the market. Exchange rates will also continue to play a major part in determining price levels.
