Wilcox world demand and supply 2011

Global Wool Demand and

Supply Overview

Chris WilcoxChairman, Market Intelligence Committee

IWTO 2011 Congress, Hangzhou9 May 2011

Agenda

• Price Trends

• Demand Drivers– IWTO Wool Textile Survey

• Production and Supply– IWTO Survey of Wool Production

• Prospects for 2011

World Wool Prices Since IWTO 2010 Congress in Paris

(% change April 2011 compared with April 2010)

52%

75%

53%

80%

107%

54%

99%

64%

80%

40%

0% 20% 40% 60% 80% 100% 120%

Aust EMI

Aust 18um

South Africa MI

NZ Fine xbred

British MI US$Local currency

% change

Source: AWEX, NZ Wool Services, Capewools, BWMB

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 fairsfor 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

0%

1%

2%

3%

4%

5%

6%

7%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

f20

12f

% change y-o-y

Recovery in Economic Growth

Source: 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)

Better Consumer Confidence……but Faltering

0

20

40

60

80

100

120

140

160

1998 2000 2002 2004 2006 2008 2010

Index = 100 US

-35

-30

-25

-20

-15

-10

-5

0

5

1998 2000 2002 2004 2006 2008 2010

Balance of Responses EU

Source: The US Conference Board and the European Commission Data to April 2011

Rising World Food and Fibre Prices

50

100

150

200

250

300

350

Jan-0

0Ja

n-01

Jan-0

2Ja

n-03

Jan-0

4Ja

n-05

Jan-0

6Ja

n-07

Jan-0

8Ja

n-09

Jan-1

0Ja

n-11

Food Meats DairyCereals Cotton Wool

Index: 2002-04=100

Source: Food and Agriculture Organisation, AWEX and Cotton OutlookNote: Nominal to March 2011

Source: Government statistical bureaus. China is volume, other countries are value. Germany is total retail sales.

Clothing Retail Sales Recovering inMajor Consuming Countries

-10%

0%

10%

20%

30%

China USA UK Japan Germany*

2009 2010

% change y-o-y

IWTO Wool Textile Business SurveyResults

• 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

Wool Textile Business - Production ActivityRating between 1 and 5

1 2 3 4 5

Early Stage Proc

Spinning

Weaving

Knitting

Garment making

Interior textiles In 6 Months

Now

2010

2009

Source: IWTO Wool Textile Business Survey; weighted results for China, Italy, Japan, India, Germany, Brazil, Portugal, Spain, Turkey and Uruguay

Very Poor Normal Good VeryPoor Good

Wool Textile Business - StocksRating between 1 and 5

1 2 3 4 5

Early Stage Proc

Spinning

Weaving

Knitting

Garment making

Interior textiles In 6 Months

Now

2010

2009

Source: IWTO Wool Textile Business Survey; weighted results for China, Italy, Japan, India, Germany, Brazil, Portugal, Spain, Turkey and Uruguay

Well below Below Normal Above Well aboveNormal Normal Normal Normal

Wool Textile Conditions Key country results

China– 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 policy

Italy– 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%


Germany– 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 orders

India– Conditions have been normal throughout the past year and are

expected to remain at this level in the next six months

Spain– 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


Japan– 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


Brazil– 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.


Uruguay– 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

Wool Imports by Major Processing Countries

(Season July to February)

0

50

100

150

200

250

300

350

400

450

China

India

Italy

German

yCze

ch R

epub

licOthe

r Euro

pe

Other

Total

mkg

gre

asy

equi

v.

2009 2010

+92%+33%

-8%

+49%-1% +15%

+3%

Note: 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

+9%

Wool Remains CompetitiveUS$ terms

0

1

2

3

4

5

6

7

8

Jan-0

0Ja

n-02

Jan-0

4Ja

n-06

Jan-0

8Ja

n-10

Ratio Synthetics

0

1

2

3

4

5

6

7

8

Jan-0

0Ja

n-02

Jan-0

4Ja

n-06

Jan-0

8Ja

n-10

Ratio Cotton

Source: AWEX, Cotton Outlook, PCI Fibres, CIRFS, Woolmark, Poimena AnalysisData to April 2011

World Production of Wool

• Long-term decline in world production almost halted in 2010

– Total production down just 0.4%– Lower production in Australia,

China, Uruguay, UK and USA– Production up in New Zealand,

South Africa and Brazil

• Apparel wool production down 2%• Interior textile wool production up

2%• Reports from nine countries –

Argentina, Australia, Brazil, China, India, New Zealand, South Africa, Uruguay, USA and United Kingdom

2010Total 1,094 mkg clean

0

50

100

150

200

250

300

350

400

AusChin

a NZArg Uru

Sth AfUKUSABraz Ind

iaOthe

r

Source: IWTO Market Information report, country statistical bureaus and IWTO member country reports

Wool ProductionKey country results

Australia– 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


New 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 stocks

Uruguay– 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


South 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 months

China– 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


United 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 countries

USA– 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

Wool Exports by Major Exporters Recover

(full 2009/10 season and 2010/11 season to February)

-5%

7%

27%

3%8%

-4%

3%

14%

28%

-27%

-3%

21%

-30%

-20%

-10%

0%

10%

20%

30%

Australia NewZealand

Argentina South Africa Uruguay Total

2009/10

2010/11

% change yr-on-yr

Source: Australian Bureau of Statistics, FLA, SUL, Capewools, NZ Meat and Wool

Source: The Woolmark Company, Poimena Analysis.

8001,0001,2001,4001,6001,8002,0002,2002,4002,6002,8003,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

e

2012

f

mkg clean

forecast

Global Wool Supply Remains Low

Prospects for 2011

• Continued economic recovery in key countries

• Increased demand for wool clothing

• Buoyant mood at textile fairs for 2011 fall/winter

• Wool competitive with cotton

• Increased orders to wool textile industry

• Low wool production levels and low stocks

• Wool prices historically high in US$

Have wool prices

peaked?

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

Documents

Wilcox world demand and supply 2011