In the current macroeconomic environment, the wool industry faces more significant challenges. High saving rates, low economic growth, and insufficient effective demand have led to a slower-than-expected recovery and lower overall demand in overall market economic activity, as evidenced by weak demand, intense market competition, and a concentration of resources among leading enterprises.

1. Demand Situation

Weak demand with signs of partial recovery- The global economic recovery is uneven, and overall demand for wool products remains weak. Although demand for high-end and functional wool products has increased due to trends towards environmental protection and sustainability, demand for most low and mid-end products remains subdued, particularly in regions experiencing economic slowdowns, such as Europe and the US. The uncertainty of the US election adds to the unpredictability.

There is a notable trend towards downgraded domestic consumption, with consumers preferring lower-cost alternatives. This has put pressure on the demand for traditional wool products. The market now prefers cost-effective and functional textiles, further compressing the market space for wool.

Sustainable and eco-friendly fiber products such as RWS and organic wool are gaining market favor, particularly in sportswear and outdoor sectors, where demand for functional wool textiles continues to grow. These products are becoming an important segment driving demand for raw wool.

2. Supply Situation

Major wool-producing countries like Australia, New Zealand, and South Africa are experiencing fluctuating wool production due to climate change. Extreme weather and changing climatic conditions have led to instability in wool production. Overall, the wool supply remains tight. The market supply chain is becoming increasingly centralized as resources and raw materials are gradually concentrated in the leading enterprises. Environmental regulations and rising farming costs, combined with higher global standards for animal welfare and environmental protection, have increased production costs and constrained wool supply growth. The excess stocks accumulated in 2023 will be gradually cleared in 2024, which may slightly ease supply adjustments but will have a limited short-term impact on the supply-demand balance.

3. Price Trends

There has been less price volatility but intense competition. Due to unstable supply and uncertain demand, the price of raw wool has remained low, resulting in a competitive market with low-profit margins. The concentration of resources further pressures small and medium enterprises, and in some microns, wool prices have fallen below cost.

Overall, the raw wool market in 2024 faces dual supply and demand pressures. While there are expectations of a demand rebound in certain segments, the overall recovery is still challenging, and the uncertainty and centralization trends in the supply side will be the key factors influencing the market.

A range of positive strategies are essential to navigate such a challenging market. The wool industry should consider the following approaches:

1. Product innovation and high value-added development. The wool industry should focus on product innovation to enhance the added value of products through technological upgrades and design improvements. For example, we can develop functional textiles with antibacterial properties, odor resistance, and biodegradability or introduce customized and high-end wool products aligned with fashion trends to attract premium consumers and enhance market competitiveness.

2. Branding and differentiation strategy. We should build a strong brand image and establish market recognition for high-end wool products. Through the differentiation strategy to create unique style and quality, avoiding homogeneous competition and achieving brand premiums.

3. Diversified market expansion. We can actively explore international and emerging markets to mitigate domestic demand shortages. In the global market, we can leverage China’s traditional advantages in textiles, collaborate with international brands and designers, and expand market share through e-commerce platforms and cross-border e-commerce channels.

4. Supply chain optimization and digital transformation. To reduce operational costs and increase enterprises' competitiveness, we should improve supply chain management and enhance production efficiency and resource utilization through digital and intelligent technologies.

5. Green environmental protection and sustainable development. With a rising global focus on environmental protection and sustainability, adopt practices such as environmental protection certification, sustainable production, and recycling to build an eco-friendly brand image and attract environmentally conscious consumers.

6. Government policies and industry collaboration. We should leverage government support policies, including technological upgrades, green development subsidies, and export incentives. We can strengthen industry collaboration through cooperative innovation and resource sharing to address challenges collectively and avoid vicious competition.

It is hoped that the wool people can seek breakthroughs in the face of challenges, achieve dual upgrades in products and brands, and establish a more competitive market position. Navigating the current challenges presents an opportunity to overcome low-profit margins and fierce competition and move forward for higher quality and more sustainable development.

（ZhangHao, China SDIC International Trade Nanjing Co., Ltd.）