3. PIPELINE DEMAND FOR
WOOL
By far the greater proportion of the textile and garment
manufacturing industries is located in the Northern Hemisphere. In the
case of long-staple spinning, the concentration is in the Asian region
dominated by China and Japan (Figure 5).
Even wool combing occurs predominantly to the north,
although there is significant combing capacity in the grower countries of
the Southern Hemisphere (Figure 6).
Pipeline Changes
No matter where mills are located, however, the impact of
changing consumer behaviour and the reaction of retailers has had a marked
effect on manufacturing and processing activities, particularly for more
fashion-oriented products:
- Quick Response: Retailers' repeat orders now comprise an
important share of total orders. Furthermore, they are difficult to
predict, the delivery time is short and the price limit is strict. A
"quick response" is required.
- Outsourcing: To contain costs, apparel manufacturers have
resorted to outsourcing garment orders to low-cost countries. This
occurs preferably in a neighbouring region to meet "quick response"
deadlines (eg. Eastern Europe for EU, Central America for US, China for
Japan).
- Intermediate Stages: Short delivery periods have also
impacted on spinners and weavers. In particular there is a recognised
need to hold a range of output stocks, but input stocks are avoided as
much as possible to reduce costs and to retain some flexibility in
responding to downstream demand.
- Environment: Increasingly restrictive consumer health
standards and effluent controls have caused changes to methods of
production and to criteria applied with respect to chemical
contamination of fibres.
- Product Innovation: The intermediate stages have a critical
role to play in the innovative development of new yarns and fabrics from
which to derive new product ranges for an increasingly selective
consumer market.
Commitment to Wool
Early stage wool textiles in 1998, facing a further
contraction in wool availability, have a challenge to maintain their
long-term viability, similar in its importance to the challenge facing the
wool producing industries. Wool combers, for example, are almost totally
reliant on wool throughput; worsted spinners, although they are
diversified in fibre use, consume predominantly wool top.
The woollen spinning sector (short staple) faces a
challenge of its own in that the market is more price sensitive, more
subject to shifts in consumer tastes and receiving a declining level of
technical support. Although regarded (and treated) as a minority sector,
the woollen spinners are important to the Australian industry, taking
around 25% of raw wool production (15% shorn wool and up to 10% noil and
other sources).
Consumption of wool by the cotton spinning system is
negligible, but its potential role in product innovation is highlighted by
the recent successful launch of two wool-cotton blend fabrics, colana and
wool denim.
Fibre Choice
Spinners comprise the first point in the chain at which
fibre choice is made - either in developing new ranges of yarn or in
meeting orders for yarn derived from downstream demand. Five factors are
critical in determining that choice:
- Level and stability of comparative fibre prices.
- Contaminants occurring in fibre supplies.
- Fibre properties suited to end-use consumer demand.
- Suitability of fibre specifications to spinners' requirements.
- Availability of fibres when required.
- Fibre Price:
Fibre selection by spinning mills is very sensitive to
price in the medium to long-term, a reflection of downstream demand (it
can be quite insensitive to price in the short-term). The The Woolmark
Company publishes a broad estimate of the ratio between average wool
prices and corresponding synthetic fibre prices, both globally and by
region (The Woolmark Company also publishes a wool : cotton ratio). In
simple terms, the ratio is influenced by:
- raw wool prices in grower countries;
- exchange rates between grower and user countries;
- prices of synthetic fibres in user countries.
All three factors (rising wool prices, a strong $A and
low man-made fibre prices) contributed to a rise in the global ratio to
a high of nearly 4·0 in June '97. Subsequently, aided by a much lower
$A, the ratio had declined to 3·5 by late 1997 (Figure 7). Experience
has shown that, supply factors aside, a ratio above 3·0 is not
sustainable in the long-term .
Australian wool growers can do nothing about exchange
rates and prices of competing fibres, but they can influence wool prices
in the long-term by reducing costs of production and distribution.
Price competitiveness of wool is also adversely
influenced by volatility of wool prices. Short-term instability
(month-to-month) tends to be averaged out through the merchanting and
topmaking stages, but the damage is caused by sustained price increases
that exceed, say, 20% in a 12-month period. Improved market information
flow and extended forward trading by spinners through dto raw wool
supplies, would alleviate, but not eliminate, the impact of the inherent
volatility of wool prices.
- Fibre Contamination:
Most publicity concerning contamination of wool relates
to the occurrence of incompatible wool pack fibres, a situation readily
corrected by use of non-contaminating packs. Two other types of
contaminants pose potentially more significant long-term threats to
wool's competitiveness; chemicals and dark fibres:
- Chemicals: Led by growing consumer awareness, governments
around the world are tightening regulations relating to permissible
levels of chemical contamination on and in consumer products. Although
most chemicals are removed from wool during scouring (a separate
problem for processors), some residues may remain on the fibres. If
specified minima are exceeded, a batch of yarn would be rendered
undeliverable.
- Dark Fibres: The value of wool yarns for lighter-colour
fabrics is severely depreciated by unacceptable levels of dark fibres.
The contamination may be caused by stained or pigmented fibres. Good
management should eliminate the incidence of stained fibres, but the
occurrence of inheritable pigmented fibres poses a much more difficult
problem to overcome.
- Fibre Attributes:
Consumers have demonstrated in many ways a shift in
their preferences for apparel fabrics, particularly in terms of lighter
weights, next-to-skin comfort, softer handle, innovative textures and so
on. Growers of wool have responded, for example, by increasing the
proportion of fine wool produced (Figure 9), and technicians have found
ways of producing lighter weight fabrics with wool of a higher micron.
However, the response by synthetic fibre manufacturers
has been more evident in the new ranges of high-performing fibres
designed to meet consumer preferences. Lycra, tencel and microfibres (eg
trevira finesse and tactel microtouch) provide good examples.
In view of the importance of product innovation in
attracting and maintaining consumer interest, fibre attributes will
continue to increase in importance as a selection criterion. Given the
constraints on the ability to adjust wool to meet shifts in consumer
demand, an increasingly attractive option is to achieve improved fabric
properties by combining the attributes of alternative fibres in a blend
(eg. wool and lycra).
- Spinners' Requirements:
Spinners' costs of production are influenced
significantly by the accuracy with which fibre suppliers meet stated
specifications. Synthetic fibre producers have an advantage in that
regard due to the precision with which machinery can closely regulate
the characteristics of the fibre produced.
In the case of wool, a delivery to spinners comprises a
blend across many farm lots and is likely to span a relatively wide
measurement range within each fibre property. Merchants and topmakers
provide a guarantee that each delivery is to specification, but spinners
believe that the ultimate spinning performance of wool can be enhanced
from two points of view:
- If spinners have more knowledge of the raw wool components in each
delivery and of the blending of those components at the scour.
- If raw fibre measurements are provided to meet spinning criteria
rather than, in the case of worsted spinning, focusing principally on
the production of wool top.
New measurements such as fibre curvature, crimp
frequency and intrinsic fibre strength (or bundle tenacity), may add
considerably to results achieved by the worsted spinner. In the case of
the woollen and cotton spinning sectors, the sets of wool measurements
most suited to those systems also require more detailed evaluation.
- Fibre Availability:
Strictly speaking, market prices ensure that fibre
availability equates with downstream demand. However, long-term user
demand can be adversely affected if mills repeatedly strike situations
where they are unable to source particular raw material supplies at
acceptable prices.
This creates a difficulty for the wool industry given
the comparative inflexibility of its short to medium-term supply
response. There are means, however, of partially resolving the problem:
- Greater flexibility in blending wool, both across wool types and
with alternative fibres, provides fibre diversity in achieving desired
yarn and fabric properties;
- Increased knowledge within downstream sectors, particularly
spinners, of the composition of current/future wool availability and a
greater understanding of how to optimally use the wool available;
- Improved grower knowledge of user needs relating to fibre
characteristics and more awareness of how to produce wool to meet
those needs;
- A more effective and extended forward trading system that enables
downstream mills to secure access to forthcoming supplies of required
wool.
Key Issues
- To ensure sustainable long-term demand for wool, the price of
wool to users needs to fall significantly relative to alternative
fibres.
- Spinners, weavers and knitters will seek textile fibres
capable of providing innovative apparel products.
- Textile fibres that enhance product innovation will be subject
to less downward pressure of prices.
- Chemical and dark fibre contamination detract from wool's
inherent advantage as a natural fibre.
- The disassociation of spinners from their raw wool supplies,
may have disadvantaged wool in gaining its full potential as a
textile fibre.
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