Nathan Watt

Who would have imagined that 2020 would turn out quite like this? Covid19 has put the world into the great unknown and the NZ wool industry is now slowly working its way out of all time low price levels. The entire industry has had to adjust its thinking to a new normal during the pandemic with local lockdowns essentially stopping 90-95% of wool exports from late March through to the end of April.

Global demand and buyer confidence took a dramatic hit throughout New Zealand’s lockdown period with prices in the first open cry auction after the lockdown period dropping by over 30% on certain types. The lack of demand has been primarily driven by many operators in the supply chain  either operating at a reduced capacity or not operating at all due to varying factors.   

Price per clean tonne for strong wool fell 14.4% on average compared to last season.  China exports have been the most affected by the Covid19 pandemic with figures from January 2020 through to June 2020 reducing by over 50% and season to season exports reducing by 34%. Other countries, in particular the European Union also had substantially reduced imports of New Zealand wool in excess of 17% season on season. With the global economic situation still uncertain and a lot of the market currently focused on conservation of cash flows we only expect a gradual increase in market conditions from record lows.

Amongst the negative market situation there are a few bright spots that are worth mentioning. We are starting to see the carpet sector show positive movement to more wool based products. India and some parts of the Middle East have increased imports by over 20%, and are showing optimistic signs for the start of the 2020/2021 season. Europe and Australasia are working their way through different lockdown restrictions and are now working through old contracts at positive rates. One of New Zealand’s biggest carpet manufactures Cavalier Bremworth has signalled their intention to move their carpet production to 100% wool thus moving away from all synthetic based carpet products. The carpet industry seems to be seeing a change in consumer behaviour driven by a public awareness of sustainable products and more eco – conscious thinking which is only beneficial for the New Zealand wool industry moving forward. The NZ strong wool sector have also united in a new group to carry out the recommendations of the wool action group report released last year.  The group comprises of representatives of existing companies in the wool sector as well as outside marketing and innovation expertise. The Group is tasked to focus on the challenges currently facing strong wool.

In summary, it has certainly been a difficult year for the entire NZ wool industry with prices at record lows. Shearing and associated costs are almost double the price of wool so simply put the industry at these price levels is not sustainable. With economic conditions slowly becoming clearer, consumers becoming more environmentally aware and wool prices at historical lows we firmly believe that the market can only head towards more sustainable prices for the upcoming season.