Australian wool exports to China
Australian wool exports to China are currently expanding at the staggering rate of 10% growth year-on-year. AWI provides detailed analysis of wool exports to this crucial market.
Trends in Australian wool exports in 2004/05
By the Market Intelligence Group of Australian Wool Services
Australia's wool exports rose in the 2004/05 season, mainly in response to higher demand from China, particularly for fine and superfine wool.
Australian wool exports rise
In the 2004/05 season, total Australian wool exports rose to 482 mkg greasy valued at US$1,875 million. This was a modest increase over the 2003/04 season by 10 per cent in volume terms and 6 per cent in US$ terms, even though retail conditions in key markets pointed to a stronger lift.
The rise was more moderate than anticipated largely because of continued dismal economic conditions in continental Western Europe, an unexpected dip in Japan's economic growth in the second half of 2004 and wool's declining value share at retail in women's wear in many developed countries.
As well, the tough business conditions in most of the wool textile industry over the past 12 months has meant that many companies are buying wool as and when they need it, rather than longer term purchasing.
Trends different for different wool types
However, within the moderate lift in total Australian wool exports, there have been some very different trends between the different types of wool
For example, exports of fine and superfine wool (19 micron and finer) rose by 17 per cent in volume terms and 20 per cent in US$ terms. This continues the strong rising trends in exports of this wool since the early 1990s. In the 2004/05 season, fine and superfine wool accounted for 40 per cent of the total value of Australian raw wool and top exports.
In contrast, Australia's exports of medium merino wool (20-23 micron) rose by only 3 per cent in volume terms and actually fell by 4 per cent in US$ terms in 2004/05. As a result, medium merino wool made up just 52 per cent of Australia's total exports by value.
Broader wool (24 micron and broader) exports from Australia, which make up only a third of the total volume and 19 per cent of the total value of Australia's wool exports lifted strongly in response to strong demand for interior textiles and furnishings. In volume terms the exports of this wool were up by 29 per cent and in US$ terms they rose by 13 per cent.
China, the dominant export market
As has been the case since the start of the 1990s, China was again the major export market for Australian wool in 2004/05. For the first time in history China captured more than half of Australia's wool in a season. This will be the first time in many years that a single country has held such a dominant share of Australia's exports, probably not since before the Second World War when Great Britain dominated Australia's wool exports.
Australian exports to China lifted by 30 per cent in 2004/05 season compared with the previous season. Australian exports to Italy, India and Bulgaria also rose during the season, but by less than the very strong lift seen for China.
The increases in exports to these countries were partially offset by falls in exports to other countries, including large declines in exports to France, Germany, Japan and South Korea. These countries are rapidly declining in importance as processors of raw wool from Australia. The wool textile industries in these countries are relocating to other, low-cost countries and regions, including China, Bulgaria, Central and Eastern Europe, Vietnam and so on.
Fine wool becomes more important for China
Between the different wool types, China has been the largest export destination for Australian medium merino (20-23 micron) and broader wool from Australia since the early 1990s and has been a major influence on the market for this wool. It is only in recent seasons that China has become an important market for Australia's fine and superfine merino wool (19 micron and finer).
In 2004/05, China's purchases of medium merino wool from Australia lifted by 22 per cent to 129 mkg greasy. This represents a 49 per cent share of Australia's exports of this wool, up from the 20 per cent share a decade earlier.
However, 20-23 micron wool has become less important for China, with this wool's share of China's total wool imports from Australia falling from 75 per cent in 1997/98 to 50 per cent in 2004/05.
In broader wool (24 micron and broader), China is also the major export destination from Australia, with exports totalling 33 mkg greasy and China holding a 64 per cent share of Australia's exports of this wool. This share is up from 42 per cent in 1994/95.
As with medium merino wool, the share of this wool of China's total imports of wool from Australia has fallen, in this case from a peak of a third in 1993/94 to less than half that at 14 per cent in 2004/05.
Fine and superfine wool has grown the strongest in both total and in share terms. Australia's exports to China of fine and superfine wool reached 161 mkg greasy in 2004/05 (up 17 per cent). This represents 40 per cent of total wool exports to China from Australia. As well, China accounted for half of Australia's exports of fine and superfine wool in the 2004/05 season, as it has overtaken Italy as the major export destination.
By the Market Intelligence Group of Australian Wool Services
5 August 2005