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Annual Cashmere Market Report
Published March 1, 2019 by Marco Spina
In 2018, the Chinese cashmere market produced around 15,000 tons and exported around 2,000 tons in dehaired cashmere. China’s cashmere production accounts for around 60% of all cashmere produced in the world. The country has a cashmere goat population of about 120 million out of around 700 million in the world.
From January to June 2018, the total export of dehaired cashmere was around 1,230 tons, an increase of 1.8% compared to 2017. The total value is around 90 million USD, which is 17.8% more compared to 2017.
In January and February 2018, only cashmere fibre still in stock was sold. The cashmere harvest season typically starts in the Shanxi Province from March onwards. The price of cashmere in March was around 600 RMB/KG. In April, the new cashmere started to arrive from Inner Mongolia, Ningxia, Shaanxi etc, but the market kept quiet since main buyers were waiting to see market developments. After May 1st labour holiday, prices went up sharply. Towards the end of June and beginning of July, prices peaked at RMB 850/KG.
The reason for this spike in prices was that the Chinese government issued very strict environmental protection rules which led to a decreasing number of breeding goats. At the same time, the cost of feed increased heavily. Another influence on the prices was the increasing demand for lamb in China. Higher prices for lamb meat also reduced the numbers of goats and with this also naturally reduced cashmere production.
From July to September, prices kept increasing very slowly due to a stable market without any big fluctuation. Towards the end of the year, cashmere stocks were sold out.
The business for cashmere yarn has been very positive both for the exporting and domestic market. This situation supported the market price.
All in all, the production of cashmere and goats in China slightly decreased. Based on lower goat numbers cashmere production in 2018 went down which lead to an increase in prices compared to 2017. Due to changes in the environment the availability of fine cashmere is low while fibre length is also shorter.
For Mongolia, cashmere is the country’s third largest exporting industry after copper and gold. The Cashmere industry provides income to over 100,000 people, 90% of whom are women, and 80% are people below the age of 35. Mongolia has an estimated total of 27 million goats and an annual cashmere production capacity of 9,400 tons.
Last year, Mongolia produced 5,413 tons of clean cashmere (90% of total cashmere production), 509 tons of dehaired cashmere, and 915,000 pieces of knitwear. Main importers of dehaired cashmere were Italy – 409.5 tons, England- 50.5 tons, China- 38.4 tons, Germany-3.2 tons and Japan-1.3 tons. The majority of production was first stage processing, with final product manufacturing only accounting for 10%.
During spring of 2018, Mongolian cashmere herders were selling their cashmere for an average price of 105.000-110.000 MNT/kg (42 USD/kg), which is almost 40,000 MNT (16 USD/kg) higher compared to 2017 prices.
The quality of raw cashmere in Mongolia has degraded over the years due to a lack of a proper national strategy for livestock, health, disorganised breeding and herders’ interests to grow their goat population rather than producing high-quality fibre. Expanding opportunities for goat meat exports would also incentivise higher quality cashmere. If the price of goat meat and skin increases, herders would be more tempted to sell off their older and male goats — rather than continue harvesting lower quality cashmere.
The government of Mongolia launched its new Cashmere Program in February 2018. The four-year program focuses on domestic production of final cashmere products, technological innovations, and financial support for cashmere producers.
Now that washing and dehairing processes of cashmere production have been upgraded, the program focuses on supporting the next stages: spinning process, yarn production, production of knitted products, and export. In particular, its main idea is to keep domestically grown cashmere, use it to make final products within the country, and reduce export of washed cashmere to China.
The government expects the program to help keep 5,500 existing jobs in the textile industry, while creating 3,600 new jobs.
From 2019-2020 the government plans to use 40% of total raw cashmere in domestic production, improve current legislation on cashmere production and sales, increase production and export volumes through accurate financial support to businesses, promote clustering, enhance reputations of Mongolian cashmere, and strengthen the preparation system of raw materials. Furthermore, from 2020 to 2021 the government plans to use 60 per cent of total raw cashmere, and improve productivity and quality of final cashmere products using advanced technologies.
The cashmere combing industry will receive a working capital investment for six to eight months, while knitting (final processing) will receive investment for up to two years. The investment for technological innovation, will be provided for no less than five years.
In 2018, the cashmere market has been severely hit through a devaluation of the local currency Rial, the strongest devaluation in the country’s history. 2018 started with a stable Rial and prices for cashmere were steady. Soon after the new season started, Rial currency lost up to 80% of its value and in accordance, prices rose very sharply. Once the Rial gained some of its value back in October of 2018, prices dropped as well. During this period it is estimated that more than 60% of cashmere was bought by Chinese traders directly or through their local agents.
Production remained unchanged and the quantity of worthy cashmere is estimated around 1,000 tons.
For 2019, the same quantity and buying structure is to be expected. In recent months prices for meat have risen sharply and the government is importing a lot of meat as well. If the meat supply is not sufficient for the country’s demand, herders will be tempted to sell goats for meat because the surge for meat price is bigger than for cashmere prices. In this case, cashmere production will decrease in quantity while prices will naturally increase.