Commodity in focus: Wool

Wed 9 Aug 2023
Posted by: Phillip Adnett
Trade News

Bundles of wool waiting to be used

The IOE&IT Daily Update’s series looking at globally traded commodities this week covers one of the warmer and more comfortable fibres in wool.

Wool is one of the oldest textiles known to humanity and has been used around the world for thousands of years.

Harvested from the fleeces of sheep and other animals, wool is a natural fibre used in making clothes, blankets, carpets, rope and other products.

Production

The process of turning the raw product into a usable material is complicated, often moving across borders and oceans. It starts with the shearing of various animals for their fleeces.

Different types of fibres are produced from different breeds or species. Whereas alpaca wool comes from Alpacas, merino is acquired from a breed of sheep that originates from the Castilian region of Spain.

After shearing, the product is graded, scoured (cleaned), carded (to remove any imperfections), spun into yarn, weaved into fabrics, dyed and finished before finally being used in the manufacturing process.

Sonia Gutierrez, head of the Institute of Export & International Trade’s (IOE&IT) task force, explains how the process often works:

“Processes like clipping, carding and spinning can happen in one country, while the manufacturing process for the finished product (coats, cardigans, sofas, etc) will normally take place in another country.”

Since multiple countries are often involved in the supply chain, Gutierrez says that being aware of the different applicable free trade agreements and rules of origin is crucial for anyone looking to ship wool goods abroad.

Major producers

Countries such as New Zealand and Australia produce a great deal of raw wool, which is then shipped to nations like Italy and China for processing.

According to the International Wool Textile Organisation (IWTO), the leading producers globally in 2022 were:

Australia              18.3% (share of global supply)

China                    17.1%

Turkey                  4%

New Zealand      6.8%

Argentina            2.1%

A good deal of the product is sold at auction, with some organisations like the Australian Wool Exchange retaining the old fashioned ‘open cry’ method of shouting orders on the trading floor.

In the UK, one of the biggest auctions is run by British Wool, a membership body representing thousands of domestic farmers. The old-style of yelling out orders has receded slightly, with online auctions becoming preferred.

History

Wool has played an outsized role in the UK’s economy until relatively recently. For England in particular, taxes from the export and import of the fibre were a pillar of royal finances.

The historian and judge Jonathan Sumption wrote that wool was “England’s primary economic asset” and kings would regularly borrow against it to finance campaigns in France. The historic English victories at Agincourt, Crecy and Poiters would not have been possible without this revenue.

With Flemish producers damaged by trade wars or actual wars, England became the leading producer of the wool in Europe, making many merchants rich beyond their wildest dreams.

At one point, a law was passed requiring all Englishmen to wear a woollen cap to go to church on Sundays, an early form of protectionism to boost English manufacturers.

Revolutionary past

During the industrial revolution, the means of production became increasingly mechanised, with large mills taking over from the more traditional artisans and processing fibres shipped in from across the British Empire.

This fuelled the luddite movement of textile workers who raided factories and destroyed equipment in order to protect themselves from what they saw as job-stealing technology.

UK decline

The UK’s domestic wool trade started to decline in the 20th century with competition from Asia. Eventually the canals that carried the shipments would see this trade drop off and the traditional mills would fall silent.

Ana Sofia, IOE&IT trade agreement & trade preference specialist, explained that the UK’s wool exports had seen a long-term decline.

“Since 2016, the UK’s export value of wool has been on a constant, slow decline with a notable drop in 2020.

“We can partly attribute this to the Covid-19 pandemic, since a lot of other commodities also saw a similar decline in exports. However, wool recorded a 33.32% drop from 2019 while overall the value of UK exports only decreased by 15.35% in the same period.”

She added it wasn’t yet clear whether this decline was due mostly to the pricing of exports or quantity of goods being shipped abroad.

A spokesman for British Wool said that the current wool trade “is very challenging”, citing the global cost of living crisis, inflation and interest rates affecting the purchasing power of consumers.

‘Bright future’

However, British Wool maintain that the product has a “a bright future”, both globally and in the UK.

A spokesperson for the trade body argued that the drive towards sustainability would benefit wool:

“Wool is one of the most sustainable fibres known to man – it is renewable, biodegradable and lasts a long time – and is part of the solution to synthetic fibres.

“Consumers are increasingly aware of the harm synthetics are doing to the environment from landfill to micro-plastics in the oceans and this should over the longer term really start to affect purchasing decisions particularly for Gen Z and Millennials who are increasingly exposed to environmental messages via social media channels.

Gutierrez, who has experience with moving fabric products across the world, says that wool faces competition from products such as cotton, acrylic, polyamide, polyester and viscose, many of which are cheaper and easier to produce.

“The garment industry is looking for the lowest cost and are replacing natural fibres, like wool, for synthetic ones, like polyester.”

Sustainability?

Like many commodities and products, the wool industry faces pressure to become more sustainable. However, there are questions around how practical this is.

A lot of water is used in processing and the various stages of production use a lot of energy too. The fact that much of the supply chain stretches across countries and continents doesn’t help matters.

Harmful chemicals are also used to process wool, causing pollution to water supplies. There also remain serious concerns about how animals are treated, not to mention the carbon impact of maintaining large herds of cattle.

Last year, campaign group Peta launched a US$1m competition to find a vegan alternative, citing the damage it caused the environment and to sheep.

The IWTO argues that wool is more sustainable than other textiles, such as linen and cotton, in that it can be washed less and has a longer lifespan. It also cites a study from the University of Leeds showing that wool is one of the more recycled fibres, with multiple ways of re-using the same fibre.