Dreams of establishing a domestic wool processing industry one step closer thanks to $1.1 million boost

Australian farmers’ efforts to re-establish a domestic wool processing industry for the first time in two decades are about to kick into high gear with a $1.1 million funding boost to create a “road map” of when and how it could be achieved.

WoolProducers Australia received a $800,000 from the Federal Government to develop pathways for domestic and diversified early-stage wool processing, while industry and AusHub will tip in about $300,000 to the cause.

The second phase will build on a study into developing domestic and early-stage wool processing released late last year.

The Deloitte Economics report, commissioned by WoolProducers Australia, was released in November after seven months of examining whether the nation could set up a domestic wool processing industry and reduce risks associated with exporting wool.

The “wide ranging” feasibility study, underpinned by a $662,000 Federal Government grant, found it would cost $1.1 billion to set up early stage wool processing in Australia, including the construction of six to 14 plants.

It would also create 600 jobs.

WoolProducers general manager Adam Dawes said the second phase of the study would inform the “what, where and how” the industry could be set up, and create a clear roadmap to finalise investigations on behalf of woolgrowers.

“The funding enables the recommendations of the Phase One report to be built upon, which established the feasibility of domestic and diversified early-stage wool processing on both commercial and trade risk management grounds,” he said.

Australia is the world’s biggest wool exporting nation, accounting for 39 per cent of global wool exports worth an average $3.5 billion.

The industry provides 200,000 jobs across the supply chain, but a reliance on exports has left industry highly exposed.

The Deloitte report revealed the $3.6 billion wool industry’s reliance on exporting nearly all of its wool unprocessed and to China left significant risks from animals disease events, trade disruptions and geopolitical tensions.

Last year’s exports reached 328 million kg worth $2.75 billion.

Mr Dawes said the next phase of the project would identify pathways toward market diversification and the mitigation of trade risks associated with Emergency Animal Disease outbreak, and tariff and non-tariff trade barriers.

The project will road map the establishment of early-stage wool processing operations — including scouring and/or carding and combing — in Australia along with four priority countries identified in the Phase One report: Bangladesh, India, Indonesia and Vietnam.

Pressures on the wool industry, including a shrinking national wool clip and increasing energy and labour costs, resulted in the offshoring of much of Australia’s wool processing capacity throughout the 1990s-2000s.

Australia now only has sovereign capacity for early-stage processing of about 5 per cent of its wool.

Industry has set a goal of boosting that figure to 50 per cent — returning $1.8 billion to the Australian economy per year.

“Domestic processing would also allow for pre-export value adding to Australian wool,” Mr Dawes said.

Target markets for Australian processed wool would include India, Vietnam, Bangladesh and Indonesia, where the strong textile sectors have been primarily focused on synthetic fibres and cotton.

AWI chief executive John Roberts said the organisation was happy to work with WoolProducers and the Commonwealth to gain greater understanding of the economics of processing diversification.

“As the wool industry’s research, development and marketing company we are glad to collaborate to further the interests of woolgrowers,” Mr Roberts said.

A steering committee has been set up to drive the direction of the work, including representatives from AWI, Australian Wool Exchange, Australian Wool Testing Authority, National Council of Wool Selling Brokers and Agents, Australian Council of Wool Exporters and Processors and Austrade.

A tender process will be undertaken in coming months to engage independent consultants to conduct the study, with input from the steering committee. It is hoped a final report will be released later this year.