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    The Global Wool Industry Chain Risks Rise As The Epidemic Spreads

    2020/7/17 10:49:00 0

    Epidemic SituationWool Industry Chain

    The outbreak of new crown pneumonia has become a global pandemic of unprecedented scale and scope of influence. In this epidemic, the textile and clothing industry has been greatly impacted. Many well-known clothing retail brands are in a difficult situation, and layoffs and pay cuts are emerging in an endless stream.

    In the just past fiscal year 2019 / 2020, Australian gross dollar prices fell by 36%, while gross prices in other wool producing countries fell by 47%. In the first four months of 2020, China's wool and clothing exports fell by 33% year-on-year. From January to may, the sales volume of clothing retail market in major wool textile consumer countries decreased by 38% year-on-year, and the sales of carpet products even fell by more than 40%. Consumer confidence has suffered a severe setback, and the forecast of 2020 world economic growth rate by relevant forecasting agencies has been reduced to - 4.9% from 3.3% in January. All countries in the world are in crisis.

    At present, the infection rate in some areas has not yet ended. Experts believe that the improvement of the epidemic situation in Europe may be a temporary seasonal factor. The wool industry is characterized by many links in the supply chain, and employees are distributed all over the world. The decline of wool price and the interruption of trade activities have a serious impact on the profitability and long-term sustainability of the wool textile industry.

    Recently, the chairman of the World Trade Organization (WTO) made a summary of the current situation of the wool textile industry.

    Wool herders

    Herdsmen around the world have been hit hard by the economic crisis, and their confidence has been hit by the drop in raw wool demand and prices. According to a recent survey by the Australian wool herdsmen Association, the average financial loss of herdsmen is 33% due to the fall of wool price. At present, more than half of the people do not sell wool because of the low price and demand. This has greatly affected the cash flow that Australian herdsmen urgently need after a long and devastating drought. The Australian industry believes that the outbreak "may affect the development of wool business in the short, medium and long term", and may lead to a further decline in Australian wool production, which is currently at a low level in the past 95 years. Herdsmen and wool production in all other wool producing countries face challenges similar to those in Australia.

    Wool traders

    Wool brokers, trading companies and agents have been directly affected by the global crisis. The decline in wool production, the reduction of wool for sale, and the increase in the stock of wool held have greatly affected the operating income and profits. In addition, wool brokers need to communicate with herdsmen who have been hit hard by drought and price collapse, and the communication difficulty is greatly increased. Due to the huge spread of pneumonia in East Asian countries, India and other countries, there is a huge reduction in the number of orders from new countries and countries in Europe. The risk and uncertainty of the spread of the epidemic also put heavy pressure on wool purchasing and exporting companies in wool producing countries.

    Wool primary processing enterprise

    Compared with the same period last year, orders for primary processing of wool decreased by 30-40%. Most of the primary processing enterprises say that the life of the weaving industry is harder than that of the knitting industry. The first half of 2020 is the worst business situation they have ever experienced, and orders are forced to be suspended or cancelled. For primary processing enterprises, they hope that it has reached the lowest point now and there will be a certain recovery in the second half of the year, but the overall situation of the whole year will be more difficult than the difficult year of 2019.

    Wool spinning and weaving enterprises

    The situation of downstream enterprises of primary processing is also depressed. The survey of wool textile industry in the near future shows a pessimistic attitude towards the European Union's wool textile industry, which is expected to decline by 50% from next year to 2020. Preparations for various textile exhibitions in the northern hemisphere, which should have been launched, were cancelled or delayed due to the epidemic. At present, there are signs of recovery in the consumption of high luxury and light luxury products, especially in the Chinese market. It is estimated that the supply and demand impact of high-grade and fine wool products will be relatively small. However, European (including Turkey) large-scale fine and coarse wool mills are still in the accelerated decline stage, some of the decline even more than 50%. This is mainly due to the shrinking demand of the formal dress market, which further dropped sharply during the period of global home isolation and forced leave policy caused by the epidemic. Such market shrinkage will also affect China's wool textile industry, which is also an important supplier of Europe, America and Japan.

    Retail of wool products

    According to the survey results of well-known retail brands, many brands are on the verge of bankruptcy, among which the clothing customization industry is facing the most serious crisis. After the impact of Sino US trade conflict in 2019, the formal dress market was hit by the new crown epidemic. Many brands in stores bear greater pressure and rent burden, but independent boutiques can survive better. Online sales can not completely replace the sales data generated by the customer flow of physical stores. Telecommuting means casual wear, and the pressure of consumers to cut wages generally, will further weaken the demand for textiles and clothing.

    summary

    The wool industry has a long supply chain with tens of thousands of herdsmen and thousands of wool textile processing enterprises all over the world. Some people describe the wool textile supply chain as a long container freight train. It takes a long time for signals to pass from one end of the train to the other, and it takes longer to change the inertia and direction of the train.

    If the front end of the train bumps into a wall, but the rear end does not receive information, it will still move at the original speed driven by inertia. We hope that all sectors in the industry can understand the seriousness of the current situation, and can make corresponding response and make joint efforts to adjust. Only by working together can we cope with the great challenges brought by the global crisis, seize development opportunities in the future recovery process, and maintain the long-term sustainability of sheep hair.

    (excerpt from iwtoc19 market information by Chris Wilcox, chairman of the IWTO Market Intelligence Committee)


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