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Chinese wool sales in 2011 - 12

Chinese wool sales in 2011 - 12 Source:
Date: 26-09-2012
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Wool price has been falling after hitting a record high in the first half of 2011. Wool people were going through a really hard time. Our sales team has learned a lot after experiencing the continuous falls in wool prices.

First, wool price falling from a high level complies with commodity price fluctuation theory. The price of T55 in US dollar terms has been doubled, and most people think it is inevitable for wool price to fall back. Many managers of domestic worsted fabric mills and worsted yarn mills complained on the 3rd International Wool Forum last year that they, as well as their customers, couldn’t afford such high wool prices. The later wool price trend proved their judgment to be accurate.

Second, depressed global economy caused continuous decline of commodity prices; wool textile industry is without exception. Surplus production capacity, overstocked products, increased labor costs and sharp decline in demand aggravate the difficult situation. Compared with former financial crisis, this time is somewhat different. People say they never came across such a weak demand before. Even losing money, they still try to maintain production. Many small-scale enterprises only work three days in one week, some even closed.

Consumer purchasing desire is declining. Orders for wool textile products reduced significantly. Expectations for European and US orders turn out to be very disappointing. China wool top exports fell by 30% in the first half of the year; fell by 51.4% in June.
Wool price was not competitive compared with other fibers. Because of higher market risks and financial pressures, upstream enterprises are unwilling to purchase wool.

Situation is not optimistic in the traditional sales season this year. Stocked products are still waiting to sell. Consumer purchasing power has declined; enterprises also became cautious in making orders. As a barometer for wool yarn sales, the Woolen Sweater Market of Puyuan Town also experienced the most sluggish year.

Exchange rate is unpredictable which has great influence on wool price. AUD exchange rate is closely related to iron ore price. Now, iron ore price has dropped to its lowest level in the past two and a half years, but AUD exchange rate is still at a high level. Therefore, AUD exchange rate might fall back.

There are enterprises in our industry, which are not necessarily the largest in scale. They don’t rely on lower prices to seize the market, but rely on improving the competitiveness of products. Even crisis has little influence on them. They have always been imitated but never surpassed.

Price will be determined by demand and supply in the foreseeable future. Since wool supply is stable, demand becomes the key factor that dominating wool price. As wool people, we should never stop promoting wool. It’s our responsibility to make more people getting to know the purest and most natural fiber in the world, maintaining wool’s market share.
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