IT HAS been a very good year for Australian wool. BRIAN CLANCY visited China to discover why.

Price-wise, the past 12 months have been good for Australian wool growers.

Fine line: A worker checks on wool spinning at the Jiangsu Sunshine woollen mill.

Big buy: Chinese processors bought almost 75 per cent of Australia's wool clip.

 

And equally so for the Chinese processors - who bought 74.5 per cent of the Australian clip.

Qingnan Wen is recognised as one of the shrewdest and most successful operator in the Chinese wool industry.

His company, Tianyu, with scouring and combing facilities in the Jiangsu Province, is reputed to be China's largest topmaker.

Mr Wen is also a very independent operator.

He runs his own coal-fired power plant and, unlike other processors who rely on importing agencies and Australian exporters to buy wool, buys through his Aussie-based company, Williams Wool.

But like most processors, Tianyu now runs below capacity because of the tight global wool supply.

Despite an annual capacity of 20,000 tonnes, Tianyu processes about 12,000 tonnes of top or combed wool - equivalent to 110,000 farm bales a year.

Most of the top is sold to Italian spinners.

Much of the company's processing is equipment salvaged from defunct plants in Australia, including the former scouring lines once operated by BWK and the West Australian Jandakot.

Mr Wen hopes to lift production, which is why he's not averse to the current high prices if they encourage a larger clip.

Nevertheless, the 60 per cent lift in raw wool over the past 12 months was a vexed point with other processors.

Madame Lifen Chen, head of China's largest worsted manufacturer, the Jiangsu Sunshine Group, said 60 per cent was too much.

She would have preferred 30 per cent.

She said the Australian Government or its wool growers must do something to reduce or control prices.

Up to 70 per cent of Sunshine output is pure wool, while the other 30 per cent is blended with synthetics and cotton.

The company has a workforce of about 6000.

Ms Chen was quick to point out the recent drop in cotton prices could increase the percentage of blends.

She said Sunshine lost a lot of money when it was holding a lot of stock (worsted fabric) during the 2008 global financial crisis.

She doesn't want a repeat of that with the current global debt crisis.

She said the past 12 months had been good for the company, partly because of the increased domestic demand.

Sunshine's market is split evenly between exports and domestic. Two years ago, it was 60:40.

Australian exporters Viterra and Queensland Cotton are among the largest buyers of wool for Sunshine.

While it's a major supplier of worsted fabric to such high-profile brands as Armani and Boss, the company has expanded into the domestic apparel market.

Most fabric is based on 18-20-micron wool, although Sunshine is proud to display luxury cloth made from 14.5 micron, with a cloth weight of 110-130gm/m and selling for 5000 remindi or $700 a metre.

Not far from the Sunshine compound is the small, but equally successful, Zilan company with a workforce of 110.

Zilan specialises in producing a pure-wool jersey knit fabric, which is made into close-to-the-skin underwear and shirts.

Included among its client brands are Just Jeans and Birk.

Zilan foreign trade manager Richard Lee said its product was exported, with the Chinese still perceiving wool to be itchy against the skin.

He said the biggest handicap for Zilan was not the price of the 18.5-micron yarn, but the supply of electricity being rationed to mills.

In a factory heavily dependent on manual labour, working in stifling, humid conditions with the airconditioning turned off can be testing.

But while raw-wool supplies and wool prices were among the concerns, there were others - such as growth of wages.

SDIC International Trade and Nanjing Wool Market boss Madame Yang Xiaoxiong said there was a lot of government pressure on mills to lift wages to keep pace with rapidly rising inflation.

Mill workers earn about 2000 remindi or $300 a month - or less than a tenth of what a factory worker would be paid in Australia. Two years ago, it was 1500 remindi.

Tight supply and cost of business finance remains another impediment.

But, as Madame Yang points out, the supply of finance was also a bigger issue for the Government, which realises the textile industry - a big employer - needed to remain viable.

Mr Wen believed the supply of non-mulesed wool was no longer an issue for China.

Ms Chen agreed, although she said it was an issue for Sunshine two years ago with several customers concerned about securing non-mulesed wool.

On wool promotion Mr Wen said he was unfamiliar with Australian Wool Innovation's Woolmark Gold promotion of luxury apparel, but would like to see more consumer advertising promoting wool's advantages.

With a heavy commitment to early-stage processing Mr Wen said he regretted the demise of Australia's CSIRO processing research and development and the loss of expertise.

Both Zilan and Sunshine are Woolmark licensees, although Woolmark labels only apply at the request of the client.

Tianyu and Sunshine are concerned with the quality of Australian wool, but Ms Chen said she thought quality problems over the past year may have been due to the processing of old wool from earlier seasons.

Mr Wen also said the quality of Australian wool was still poorer than that coming from South Africa.

He said he could achieve a 1 per cent higher combing yield with South African Merino wool.