Global Wool Demand and       Supply Overview             Chris WilcoxChairman, Market Intelligence Committee    IWTO 2011 ...
Agenda• Price Trends• Demand Drivers  – IWTO Wool Textile Survey• Production and Supply  – IWTO Survey of Wool Production•...
World Wool Prices Since IWTO 2010                           Congress in Paris                    (% change April 2011 comp...
Demand Fundamentals Positive• Economic recovery and higher  consumer confidence in spite of high  unemployment• Better ret...
Recovery in Economic Growth      % change y-o-y    7%    6%    5%    4%    3%    2%    1%    0%                           ...
Better Consumer Confidence…                               …but FalteringIndex = 100              US                       ...
Rising World Food and Fibre Prices   Index: 2002-04=100    350    300                 Food                Meats           ...
Clothing Retail Sales Recovering in                            Major Consuming Countries  % change y-o-y    30%           ...
IWTO Wool Textile Business Survey                      Results• Second year• Shows sentiment rather than actual• Industry ...
Wool Textile Business - Production Activity                                             Rating between 1 and 5            ...
Wool Textile Business - Stocks                                             Rating between 1 and 5                         ...
Wool Textile Conditions                       Key country resultsChina– Full recovery in 2010 with increased sales in both...
Wool Textile Conditions                        Key country resultsGermany– Activity levels reported to be poor in 2010 in ...
Wool Textile Conditions                        Key country resultsJapan– Activity levels and orders reported to be normal ...
Wool Textile Conditions                        Key country resultsBrazil– Activity levels reported to be good to very good...
Wool Textile Conditions                        Key country resultsUruguay– The ESP sector is the most significant, with ot...
Wool Imports by Major Processing                                                    Countries                             ...
Wool Remains Competitive                                                  US$ terms       Ratio               Synthetics  ...
World Production of Wool •    Long-term decline in world                                               2010      productio...
Wool Production                           Key country resultsAustralia– Small decline in production expected in 2010/11, f...
Wool Production                           Key country resultsNew Zealand– Total production forecast to increase by 2% in 2...
Wool Production                             Key country resultsSouth Africa– Total production forecast to be slightly lowe...
Wool Production                           Key country resultsUnited Kingdom– Marginal increase in UK wool production– UK w...
Wool Exports by Major Exporters                                   Recover               (full 2009/10 season and 2010/11 s...
Global Wool Supply Remains Lowmkg clean3,0002,8002,6002,400                                                               ...
Prospects for 2011• Continued economic  recovery in key countries• Increased demand for wool  clothing• Buoyant mood at te...
Factors to Watch in 2011• Government debt in Europe and the  US• Inflation and macro-economic policy• Oil prices and effec...
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Wilcox world demand and supply 2011

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Wilcox world demand and supply 2011

  1. 1. Global Wool Demand and Supply Overview Chris WilcoxChairman, Market Intelligence Committee IWTO 2011 Congress, Hangzhou 9 May 2011
  2. 2. Agenda• Price Trends• Demand Drivers – IWTO Wool Textile Survey• Production and Supply – IWTO Survey of Wool Production• Prospects for 2011
  3. 3. World Wool Prices Since IWTO 2010 Congress in Paris (% change April 2011 compared with April 2010) 64% US$ British MI 53% Local currency 99% NZ Fine xbred 80% 54% South Africa MI 40% 107% Aust 18um 75% 80% Aust EMI 52% 0% 20% 40% 60% 80% 100% 120% % changeSource: AWEX, NZ Wool Services, Capewools, BWMB
  4. 4. Demand Fundamentals Positive• Economic recovery and higher consumer confidence in spite of high unemployment• Better retail sales in some markets• Buoyant mood at fabric trade fairs for Fall/Winter 2011• Strong demand for “natural” fibres• Increased orders and activity in wool textile industry, notably in Europe• Rising commodity prices• Surging cotton prices• Wool competitive with other fibres
  5. 5. Recovery in Economic Growth % change y-o-y 7% 6% 5% 4% 3% 2% 1% 0% f f 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20Source: IMF, Consensus Forecasts (April 2011) and Poimena AnalysisNote: Economic growth in China, Japan, USA, UK, Germany, Italy, France and South Korea, weighted by apparel wool consumption (from Woolmark/IWTO)
  6. 6. Better Consumer Confidence… …but FalteringIndex = 100 US Balance of Responses EU 160 5 140 0 120 -5 100 -10 80 -15 60 -20 40 -25 20 -30 0 -35 1998 2000 2002 2004 2006 2008 2010 1998 2000 2002 2004 2006 2008 2010 Source: The US Conference Board and the European Commission Data to April 2011
  7. 7. Rising World Food and Fibre Prices Index: 2002-04=100 350 300 Food Meats Dairy Cereals Cotton Wool 250 200 150 100 50 00 01 02 03 04 05 06 07 08 09 10 11 n- n- n- n- n- n- n- n- n- n- n- n- Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja JaSource: Food and Agriculture Organisation, AWEX and Cotton OutlookNote: Nominal to March 2011
  8. 8. Clothing Retail Sales Recovering in Major Consuming Countries % change y-o-y 30% 2009 2010 20% 10% 0% -10% China USA UK Japan Germany*Source: Government statistical bureaus. China is volume, other countries are value. Germany is total retail sales.
  9. 9. IWTO Wool Textile Business Survey Results• Second year• Shows sentiment rather than actual• Industry production activity, orders and stock levels – For 2010, Now and in Next Six Months• Early stage processing, spinning, weaving, knitting, garment making and interior textiles• Responses from ten countries: China, Italy, India, Germany, Japan, Brazil, Spain, Portugal, Turkey and Uruguay• Results weighted by wool usage
  10. 10. Wool Textile Business - Production Activity Rating between 1 and 5 In 6 Months Interior textiles Now Garment making 2010 Knitting 2009 Weaving Spinning Early Stage Proc 1 2 3 4 5 Very Poor Normal Good Very Poor GoodSource: IWTO Wool Textile Business Survey; weighted results for China, Italy, Japan, India, Germany, Brazil, Portugal, Spain, Turkey and Uruguay
  11. 11. Wool Textile Business - Stocks Rating between 1 and 5 In 6 Months Interior textiles Now Garment making 2010 Knitting 2009 Weaving Spinning Early Stage Proc 1 2 3 4 5 Well below Below Normal Above Well above Normal Normal Normal NormalSource: IWTO Wool Textile Business Survey; weighted results for China, Italy, Japan, India, Germany, Brazil, Portugal, Spain, Turkey and Uruguay
  12. 12. Wool Textile Conditions Key country resultsChina– Full recovery in 2010 with increased sales in both domestic market and export markets– Exports to ASEAN countries up sharply following free trade agreement– Still strong conditions, particularly at ESP and spinning, but moving back to ‘normal’ in next 6 months– Concerns about the high raw wool prices, access to labour, the situation in export markets and tighter domestic macro-economic policyItaly– Very good to good activity levels in all sectors in 2010 except garment making– Now moving back towards ‘normal’ activity levels and orders, which is expected to be maintained in the next six months– Increased wool yarn and fabric exports, with worsted wool yarn exports up by 21%
  13. 13. Wool Textile Conditions Key country resultsGermany– Activity levels reported to be poor in 2010 in spinning and weaving, but better in knitting, although orders were reported to be normal– Activity levels have improved and are now good on the back of improved ordersIndia– Conditions have been normal throughout the past year and are expected to remain at this level in the next six monthsSpain– Less optimism in Spain than in most other countries, with activity levels and orders at ESP and spinning only at ‘normal’ in 2010, but poor in weaving.– Good activity levels and orders for ESP now and in the next six months, but poor conditions and orders in spinning and weaving reported now and in the next six months
  14. 14. Wool Textile Conditions Key country resultsJapan– Activity levels and orders reported to be normal in 2010 in all sectors, an improvement on 2009– There has been an improvement in the first four months of 2011, with activity levels and orders reported to be good.– Consumer confidence hit by the earthquake, tsunami and nuclear crisis. This plus the high wool prices likely to see a mild slow down from the strong demand in the second half of 2011.– Strong fashion trend to wool for autumn/winter 2011 and trading up by retailers will moderate the slow-down.Portugal– Most pessimistic results of all countries, probably due to the sovereign debt crisis in Portugal– Activity and order levels poor for all sectors except for spinning and ESP, which is rated as normal but this is expected to drop to poor
  15. 15. Wool Textile Conditions Key country resultsBrazil– Activity levels reported to be good to very good in ESP, spinning and interior textiles in 2010 but only normal in weaving, knitting and garment making– Conditions generally better now in all sectors, in particular in ESP which is rated as very good with very low stocks. A moderate weakening is expected in the next six months.Turkey– Conditions were good to very good across all sectors in 2010, remain that way now and not expected to weaken much. Stocks are very low in ESP.– In spite of the good conditions, the industry is contracting, with high raw material prices (wool and synthetics) the most significant challenge.
  16. 16. Wool Textile Conditions Key country resultsUruguay– The ESP sector is the most significant, with other sectors much smaller– Activity levels and orders were good in ESP and almost all other sectors in 2010, while stocks were below normal throughout the year– Current activity and order levels in ESP are very good and this expected to be maintained in the next six months.– One sector that is seeing poor conditions is garment making
  17. 17. Wool Imports by Major Processing Countries (Season July to February) +3% 450 400 350 2009 2010 mkg greasy equiv. 300 -8% 250 200 150 100 +9% -1% +49% +15% 50 +33% +92% 0 y na er a ly l ic pe ta an di Ita bl th hi To ro In m u O C Eu ep er G R er ch th O ze CNote: From the five major exporting countries (Australia, New Zealand, Argentina, Uruguay and South Africa)Source: Australian Bureau of Statistics, FLA, SUL, Capewools, NZ Meat and Wool
  18. 18. Wool Remains Competitive US$ terms Ratio Synthetics Ratio Cotton 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 00 02 04 06 08 10 00 02 04 06 08 10 n- n- n- n- n- n- n- n- n- n- n- n- Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja JaSource: AWEX, Cotton Outlook, PCI Fibres, CIRFS, Woolmark, Poimena AnalysisData to April 2011
  19. 19. World Production of Wool • Long-term decline in world 2010 production almost halted in 2010 400 Total 1,094 mkg clean – Total production down just 0.4% 350 – Lower production in Australia, China, Uruguay, UK and USA 300 – Production up in New Zealand, 250 South Africa and Brazil 200 • Apparel wool production down 2% 150 • Interior textile wool production up 2% 100 • Reports from nine countries – 50 Argentina, Australia, Brazil, China, India, New Zealand, South Africa, 0 Uruguay, USA and United Kingdom a er Z St u C s Af na az SA K g r di Au N Ar U th U Br hi h In U OSource: IWTO Market Information report, country statistical bureaus and IWTO member country reports
  20. 20. Wool Production Key country resultsAustralia– Small decline in production expected in 2010/11, followed by a small increase forecast for 2011/12 due to slightly higher sheep numbers– Balance between high wool prices and high lamb prices– Very good seasonal conditions in eastern Australia but drought in Western Australia– Micron profile has broadened due to good seasonal conditions and shift to dual-purpose sheep– A$ at record levels against US$Argentina– Drought in some areas mean that production will be around the same in 2010/11 as in previous season in spite of better season in Patagonia– Increased production of apparel wool, with 57% finer than 25 micron– Exports in 2010/11 down 4% year on year to March, with exports to Italy and Germany increasing strongly but exports to China well down
  21. 21. Wool Production Key country resultsNew Zealand– Total production forecast to increase by 2% in 2010/11 after a 15% increase in 2009/10 due to increased cut per head and sheep numbers– Production in 2011/12 forecast to decline by 5% due to lower cut per head, although sheep numbers up slightly– Increased exports due to increased production plus sales from stocksUruguay– Sheep numbers at the start of 2010/11 were 11% lower– In spite of higher fleece weights, wool production expected to be down by 2% this season– High wool and sheep prices are encouraging a rebuilding of the sheep flock, with lower slaughterings recently and increased demand for rams– Total production in 2011/12 expected to be about the same as this season– Exports in 2010/11 up strongly, with strong growth in exports to Western Europe offsetting weaker exports to China
  22. 22. Wool Production Key country resultsSouth Africa– Total production forecast to be slightly lower in 2010/11 after a the modest rise in 2009/10 due to drought in some regions. Production expected to be slightly higher in 2011/12– Very good prices for both wool and sheep are encouraging for growers– Wool exports to Western Europe up strongly, with declines in exports to India and China– Animal health concerns have been a challenge for exports in recent monthsChina– After declines in previous years, wool production has stabilised in the past two years– High prices will encourage state-owned enterprises to lift wool production but most household farms are focused on meat sheep– Overall production is likely to be maintained at current levels in 2011/12
  23. 23. Wool Production Key country resultsUnited Kingdom– Marginal increase in UK wool production– UK wool prices hit the highest level in 25 years due to a number of reasons– But, wool production unlikely to change much from levels seen in 2010 as growers respond to lamb prices, not wool prices– UK lamb prices soared in 2011 due to lower competition from NZ and other countriesUSA– A 1% decline in wool production expected in 2010 due to lower sheep numbers and a further decline in 2011 and 2012 is expected– High prices for wool and lamb will encourage increased production, but not for a couple of years as sheep inventories are rebuilt– Exports lifted in 2010, with China the major export destination
  24. 24. Wool Exports by Major Exporters Recover (full 2009/10 season and 2010/11 season to February) % change yr-on-yr 30% 28% 27% 21% 20% 14% 8% 10% 7% 3% 3% 0% -5% -3% -4% -10% 2009/10 -20% 2010/11 -30% -27% Australia New Argentina South Africa Uruguay Total ZealandSource: Australian Bureau of Statistics, FLA, SUL, Capewools, NZ Meat and Wool
  25. 25. Global Wool Supply Remains Lowmkg clean3,0002,8002,6002,400 forecast2,2002,0001,8001,6001,4001,2001,000 800 2012f 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010eSource: The Woolmark Company, Poimena Analysis.
  26. 26. Prospects for 2011• Continued economic recovery in key countries• Increased demand for wool clothing• Buoyant mood at textile Have wool fairs for 2011 fall/winter prices• Wool competitive with peaked? cotton• Increased orders to wool textile industry• Low wool production levels and low stocks• Wool prices historically high in US$
  27. 27. Factors to Watch in 2011• Government debt in Europe and the US• Inflation and macro-economic policy• Oil prices and effect on economic recovery• Sustainability of high cotton prices• Impact of higher textile fibre prices on retail prices• Changing flock structure in response to high sheepmeat prices

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