Apparel fibre prices have been drifting lower during 2024, continuing a trend that began in 2023. Merino wool usually follows the lead of the wider apparel fibre complex. We take a look at recent price movements in the context of the apparel fibre complex.
Apparel fibre prices are subject to the same macroeconomic
influences and are also connected by substitutability, so it is no surprise
that they tend to be strongly positively correlated. What does vary are the
relative prices, as supply and fashion vary with time between fibres and grades
of fibre. Lower supply has helped underpin much higher price ratios for broader
merino wool during the past three decades and looks set to continue pushing the
trend price ratio for broad merino to other fibres higher in the years to come.
Figure 1 compares a price series for the average merino
micron fleece price, from 2005 onwards, and a weighted average price for
cotton, polyester staple, acrylic staple and viscose (NWSF – non-wool staple
fibre), all in Australian dollar terms. While the extent of the various price
cycles vary (a disappointing 2007-2008 cycle, 2011 was driven by an
extraordinary cotton market and merino outperformed in 2017-2019) merino and
the NWSF clearly follow similar trends and cycles, the most recent of which has
been a period price drifting lower through 2023 and 2024.
Comparing the year-on-year change in price teases out the
similarity of movement between the two series shown in Figure 1. Figure 2 shows
the year-on-year change (3-month smoothed) for the average merino price at
Australian auctions from 2005 to November 2024 and for the NWSF in Australian
dollar terms. In this schematic, we are simply looking at the rolling yearly
change in merino (roundly 19.5-18.5 micron for this period) and the NWSF
series. Both the NWSF and merino prices have bounced around since early 2024
but moved little.
In Figure 3 the year-on-year change in merino and the NWSF
in US dollar terms is shown. This takes out the influence of the Australian
dollar and allows us to look at the price movements from the perspective of the
supply chain. The 2011 cycle was much stronger in US dollar terms, 2014 -2015
weaker and the 2017-2018 cycle better defined.
What can we draw from these graphs? Merino prices (except
the sub-16 micron categories) are stuck near the base of a price cycle along
with apparel fibre prices generally. To use an ocean metaphor, the tide (being
apparel fibre prices generally or demand) is out. In practical terms, this
means that no amount of marketing is going to alter this fact for an apparel
fibre such as merino at present. On the other hand, improved on farm
productivity could help soften the effects of low prices.
What does it mean?
Wool prices cycle up and down roughly in line with the wider apparel fibre prices, cotton, polyester, acrylic and viscose. There are variations in the price cycles and trends between the different fibres but they tend to be temporary rather than permanent. Apparel fibres in general are awaiting a pickup in economic growth in the major economies, to help underpin a rising price cycle.
Key Points
- The merino price (with some notable exceptions at the very fine edge of the micron distribution) continues its normal course of following the path of the wider apparel fibre market complex
- All the major apparel fibres have been drifting along at lowish levels for the past two years.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Emerging Textiles, Fibre Year, AWEX, RBA, ICS, Mecardo
