Contracts give certainty for buyers, sellers

BY: LYNDA GRAY

Contract selling of crossbred wool is a win:win for both growers and manufacturers. That was the overriding message of an online woolshed meeting hosted by PGG Wrightson Wool in mid- October.

The 50 minute online forum which attracted about 100 woolgrowers, included overseas comment from the executives of Danspin, a large Danish carpet yarn producer and client of PGGW. Danspin buys 8000-9000 tonnes of wool a year and about one-third of that was from New Zealand.

Danspin purchasing manager Ole Winther said when they want top quality, the company uses NZ wool.

“It’s clean, white and black fibre free and we can dye it into nine shades,”

Another compelling advantage of NZ wool was the long term supply and price contract arrangements with PGGW. Contracts gave both yarn and carpet manufacturers known price variables on which to operate which was especially important when launching new product ranges.

PGGW chief executive Stephen Guerin said contract arrangements with crossbred wool growers is an area PGGW wanted to encourage.

“We see the opportunity for growers to allocate a portion of their clip to contract while still having the opportunity to sell on the open market, so it’s also about risk sharing.”

There were other overseas clients looking for long-term wool supply contracts and PGGW was now keen to promote these selling options to crossbred growers. At the same time, they were looking at the possibility of launching a Bidr online selling system for wool.

Regardless of the selling platform the export prospects for crossbred wool were “very challenging”, especially since announcement of the second round of lockdowns in Europe.

• According to B+LNZ statistics the export value of strong wool has reduced 46% from a $6.11kg (clean) average in 2015 to $3.30 (clean) average for the eight months up until August 2020.

• The volume of strong wool exported has not changed greatly. The four year average over the 2015 to 2019 calendar years was 44,654 tonnes (clean), ranging from 40,635 tonnes in 2017 to 52,243 tonnes in 2019.

‘We see the opportunity for growers to allocate a portion of their clip to contract while still having the opportunity to sell on the open market, so it’s also about risk sharing.’

STRONG SUPPORTERS

New Zealand coarse wool would continue to play a significant role in Danspin’s wool textile business, company owner and managing director Lars Pedersen said.

During the online meeting he said that despite losing market share to synthetics Danspin continued to invest in new wool product lines and technology.

Oil-based manufacturers had a lot of money to invest in marketing and have done this while the wool industry has reduced investment.

“I believe we are seeing a small increase in demand for wool due to environmental concerns.”

Danspin was working with carpet manufacturer Bloch and Behrens to find solutions to stimulate demand in the wake of Covid. An example was a new heavy coarse wool yarn,100% NZ, for rug products.

Since June there had been a resurgence in carpet and upholstery demand in the private home and domestic market but not so in the contract sector which included airlines, cruise ships and hotels.

While others have gone broke in recent years, textile producer Danspin has stayed afloat and stuck to its core business of spinning wool and wool blend yarns for carpet manufacturers throughout Europe, the UK and USA. It’s offset costs and imminent doom by relocating production facilities to Lithuania, but also has a 31,000sqm spinning factory employing 400 people in Ikast, Denmark.