Demand in the Australian wool market has been subdued and uneven in recent months, which has caused soft, although still volatile, wool prices.
The weak demand is reflected in the latest data, which shows that wool exports dropped sharply in September compared with a year earlier.
The weight of wool exported in September was 35 per cent below the levels in September 2018, while the value of exports was down by a massive 56pc.
Incredibly, this monthly year-on-year decline by value is the largest seen since June 1990!
The major, but not only driver of this drop was exports to China (the major export destination) with exports down 58pc in value and 37pc in volume.
The Chinese wool textile industry is facing some pretty difficult trading conditions.
Even though there have been some tentative signs in the past month of an easing in the tensions between the US and China on the trade front, this has not translated into actual removal of the additional duties the US imposed on Chinese wool garments in September.
The impact of these additional 15pc import tariffs can be seen in the latest import data from the US.
US imports of wool clothing from China slumped in September, down 16pc year-on-year in quantity and 13pc in value.
The US is the third largest market for China's wool garment exports, so this has hurt China's mills, which in turn has caused lower demand for weavers, knitters, yarn spinners, wool topmakers and scourers.
On top of that, China's economic growth rate is slowing as a result of the US/China trade war and consumers have become cautious.
The value of China's retail sales of garments grew by just 2.6pc year-on-year in the first 10 months of 2019.
This is the slowest rate of growth in China since at least the mid-1990s.
Remember that China is the world's largest retail consumer of wool clothing and its domestic retail market accounts for 50-60pc of China's imports of raw wool.
The twin challenges of the slow growth rate for clothing retail sales in China's domestic market combined with the decline in its exports of wool clothing to the US, are without doubt the reasons for the reduced demand throughout China's wool textile industry.
It has caused stocks of semi-processed and finished wool products to build up in Chinese mills, which has led to lower orders to China's early stage processors and weak demand for raw wool.
The news isn't all negative.
The US adding 15pc duty on imports of wool garments from China has seen the US redirect its purchases to other countries.
US imports from these other sources leapt in September, with imports from Italy in September jumping by 40pc (quantity) and by 18pc (value), while imports from Vietnam were up 37pc (quantity) and 52pc (value).
These increases plus higher imports from a range of other countries partly offset the decline in imports from China.
