Australian wool prices are forecast to rise as workers head back to the office again, dressed in their new suits.
A new report by agricultural bank Rabobank says a recovery in office wear demand will drive wool prices, which have been subdued during the COVID-19 pandemic due to supply disruptions and an increase in working from home.
Australia controls around 90 per cent of global fine-wool exports, where prices are largely determined by demand from Chinese and Italian garment makers.
Rabobank agricultural analyst Dennis Voznesenski said in the report that retail apparel sales in the US were growing again, and woollen suit imports had returned to pre-pandemic levels in France.
“The recovery in office-wear demand may see suit sales growth rise above general retail apparel in 2022,” he said.
“Even if we see an interest rate-induced slowdown in the world economy this year, we expect the demand for wool from workers returning to offices and buying suits to be the more important variable for wool.”
The bank forecasts the Australian benchmark merino wool price will trade, on average, between $13.50 and $15 per kg in 2022, up seven per cent on the 2021 average.
The report noted Australian wool’s export exposure to China, its largest market, had remained high in 2021.
Australian wool experienced something of a renaissance prior to the pandemic as manufacturers of fine clothing and sports wear prioritised the natural fibre over synthetics. Prices reached above the once mythic A$20 per kg mark in 2018.
Government data shows Australia exported 317 million kg of wool in the January to November 2021 period, up 39 per cent on COVID-19 disrupted 2020.
But the industry is tempering its expectations as the logistical challenges of the pandemic remain.
“There’s confidence in the market now … but the biggest issue is the shipping,” Peter Morgan, executive director of the Australian Council of Wool Exporters and Processors, told AAP.
He said that the wool sector was still reeling from the initial “kick in the guts” as a result of the pandemic.
An industry report this week noted congestion had caused delays for more than a month.
(Australian Associated Press)