Global Wool Markets Enter a New Era of Supply Tightness
Global Wool Markets Enter a New Era of Supply Tightness:
What Comes Next?
Wool Market Outlook: Merino, Strong Wool, Demand, Supply & Price Trends
Global wool markets are entering a markedly tighter phase, creating a more constructive medium-term outlook for producers while introducing new risks for processors, manufacturers and investors.
The Australian Eastern Market Indicator (EMI), the leading benchmark for fine wool pricing, reached 1,700 cents per kilogram clean in February 2026—its highest level since 2019 and around 60% above the previous year. The move reflects a combination of constrained southern hemisphere supply, renewed Chinese buying and growing demand for natural, traceable and lower-impact fibres.
But the current rally is not simply another commodity cycle. The structure of the global wool market is changing.
Cognos Global Partners’ new Global Wool Market Outlook Report examines how these forces could shape wool prices over the next three years, with particular focus on the contrasting prospects for fine merino and strong wool.
Merino Wool: Firm Prices, Constrained Supply
The outlook for merino wool remains comparatively positive.
Australian wool production has fallen substantially over the long term as sheep numbers have declined, leaving the market with limited capacity to respond quickly when prices rise. Even where producers have an incentive to rebuild flocks, additional supply requires time to emerge.
At the same time, Chinese textile demand remains a critical component of the market. China processes the overwhelming majority of Australia’s exported wool, making its economic performance and textile manufacturing activity key variables for prices.
The report’s baseline outlook therefore anticipates merino prices remaining historically firm through 2027, followed by a gradual normalisation as production responds and demand growth becomes more moderate.
However, the report identifies another increasingly important source of support: wool’s sustainability premium.
Sustainability Is Becoming a Structural Demand Driver
Wool’s natural characteristics—biodegradability, durability, moisture regulation and comparatively favourable environmental credentials—are becoming increasingly relevant as brands, consumers and regulators scrutinise synthetic fibres.
European sustainability regulation and initiatives such as digital product traceability could strengthen the competitive position of certified wool over the forecast period. This is particularly significant for fine merino, where luxury and premium apparel markets can accommodate higher input costs.
Traceability, non-mulesed production and recognised certification schemes are consequently moving beyond niche considerations and towards becoming important components of premium wool marketing.
The report explores how this “green premium” could influence price formation and reshape competitive positioning between producing regions.
Strong Wool Faces a More Divided Future
The outlook becomes more complex when considering strong wool.
New Zealand remains a particularly important producer in this segment, but traditional applications such as carpets and rugs continue to face intense competition from synthetic fibres.
That does not mean strong wool lacks growth opportunities.
Technical applications are emerging as an important alternative demand source, particularly building insulation, acoustic products and specialist textiles. Wool’s natural flame resistance, moisture management and embodied-carbon characteristics can provide advantages in applications where environmental performance is increasingly incorporated into purchasing decisions.
The result is a bifurcated market: conventional carpet demand remains challenging, while technical applications could provide a new structural demand floor.
China Remains the Market’s Biggest Swing Factor
Despite the long-term sustainability story, wool remains highly exposed to global economic conditions—and particularly to China.
China’s importance to Australian wool exports creates a significant concentration risk. A relatively orderly Chinese economic slowdown could allow wool demand to remain resilient, but a more severe downturn would have substantially different consequences.
The report therefore examines several scenarios, including a Chinese hard landing, accelerated sustainability adoption and a potential southern hemisphere supply shock.
The central message is that the range of possible outcomes is unusually wide.
Where Could the Next Supply Growth Come From?
One of the report’s most significant themes is the limited ability of established producers to rapidly increase production.
Australia and New Zealand have both experienced substantial long-term reductions in sheep numbers. Meanwhile, South American producers—particularly Uruguay and Argentina—could have a greater role to play in future supply.
Uruguay is particularly noteworthy because of its established processing capabilities and strong progress in wool certification. Argentina also offers significant production potential if investment, infrastructure and policy conditions become more supportive.
Other emerging suppliers, including parts of Central Asia and Eastern Europe, could become strategically relevant over a longer timeframe, although they are unlikely to materially alter global supply within the immediate forecast period.
Three Scenarios for Wool Prices Through 2029
The report does not treat the current price environment as a straightforward linear bull market.
Instead, it assesses a range of possible outcomes:
Baseline: Merino prices remain elevated through 2027 before gradually moderating as supply responds.
Sustainability acceleration: Faster regulatory and consumer movement away from synthetic fibres supports stronger and more persistent wool premiums.
Chinese hard landing: A significant deterioration in Chinese economic conditions produces a sharp correction in wool demand and prices.
Southern hemisphere supply shock: Drought, flock liquidation or other disruptions create an acute global shortage and potentially push prices back towards previous highs.
Synthetic fibre breakthrough: Technological advances reduce wool’s sustainability advantage and put pressure on existing premiums.
This scenario-based approach is designed to help market participants understand not only the central forecast, but also the risks that could materially change the trajectory.
What the Wool Market Outlook Means for 2026–2029
The broader conclusion is that wool is entering the next phase of its market cycle from a position of structural supply constraint.
For merino, limited Australian production, resilient premium apparel demand and sustainability-led premiumisation provide a constructive foundation. For strong wool, the traditional carpet market remains under pressure, but technical and insulation applications offer a potentially important avenue for growth.
For producers, the current environment creates an opportunity to invest in quality, traceability, genetics and downstream processing. For manufacturers and buyers, it highlights the importance of understanding where future supply will come from and how quickly production can respond to changing prices.
Above all, the report suggests that the wool market of 2029 could look materially different from the market of the previous decade—with sustainability, supply concentration and technical applications playing a much greater role in determining value.
Download the Full Global Wool Market Outlook 2026–2029
The full report provides a deeper analysis of merino and strong wool price forecasts, historical market cycles, global production, Chinese demand, sustainability regulation, emerging supply regions, macroeconomic risks and scenario-based outcomes through 2029.
Download the full report to explore the data, forecasts and strategic implications shaping the next three years of the global wool market.
