High wool prices trouble garment makers, margins dip

The sharp rise in the price of greasy wool in the international market has hit Indian woollen yarn manufacturers hard. The major players are either retaining orders by squeezing margins or restricting orders to maintain margins.

The large players like Jayashree Textiles (Aditya Birla Nuvo), Vikram Woollen (Grasim) and Oswal Woollen Mills, are having a tough time due to supply bottlenecks and consequent increase in price.

The prices were pushed up in Australia, the largest supplier of greasy wool in the world, due to slaughtering of Merino sheep after pastures dried up due to scanty rainfall in Western Australia and cyclones in Victoria.

 

According to S K Patodia, head of the wool business at Aditya Birla Group, the prices are unprecedentedly high. The international prices of 18.5 micron and other finer wool have increased from $11.96 to $19.16 per kg in the past four months, he said. The miller cannot absorb a 60 per cent price rise in such a short span, he added.

The Aditya Birla Group has 34,000 spindles with a capacity of four million kg of wool yarn per annum. Of this, about three million kg is normally exported and a million is sold in the domestic market.

He said the impact of high input cost was more evident on finer quality. “The orders for 16.5 to 18.5 micron yarn have been reduced. Earlier, finer woollen yarn used to constitute 25 per cent of the export basket and this has now dropped to 15-18 per cent. The demand for coarse varieties has been increased during this phase.”

Strengthening of the Australian dollar is also to some extent responsible for accentuating the troubles of wool importers.

The managing director of Oswal Woollen Mills, J L Oswal, said some manufacturers had resorted to blended woollen yarn by substituting acrylic and polyester to cut cost. But the manufacturers of high-end brands do not.

“The Monte Carlo and Canteberry brands are niche market woollen garments, so we have pressed our margins to retain our customers,” he said.

The merino wool produced in Australia is the finest quality, used in suit lengths, shawls and premium garments. The substitutes such as angora rabbit wool, lamb wool, alpaca wool and mohair are not viable due to proportional increase in their price, he said.

Industry sources said there had been a decline of about seven in the volume of greasy wool import in the wake of the price rise.