Voluntary Report - public distribution

**Date:** 3/28/2005

**GAIN Report Number:** IN5030

IN5030

**India**

**Product Brief**

**Indian Wool Market Brief**

**2005**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, New Delhi

**Prepared by:**

V. Shunmugam

**Report Highlights:**

Due to the apparent current short supply situation in Australia, Indian
knitwear wool importers are looking for alternative cheap supply sources
for blending with limited high-priced Australian supplies. This provides
an opportunity for US wool exporters, who may wish to work with Indian
agents. Like other major suppliers such as Australia and New Zealand, US
exporters should concentrate on building supply lines and establishing
quality designations for major blends, especially in the worsted and
knitwear sectors.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

New Delhi \[IN1\]

\[IN\]

**Table of Contents**

[I. Market Overview 3](#i.-market-overview)

[II. Opportunities and Constraints
3](#ii.-opportunities-and-constraints)

[Table 1: Quality Attributes of US Wool Vs. Australian Wool
4](#table-1-quality-attributes-of-us-wool-vs.-australian-wool)

[III. Marketing Channels 4](#iii.-marketing-channels)

[IV. Market Access 5](#iv.-market-access)

[V. Key Industry Contacts 5](#v.-key-industry-contacts)

[Figure 1: Market Channel for imported Wool
7](#figure-1-market-channel-for-imported-wool)

# I. Market Overview

India produces about 47,000 tons of wool, mainly of the coarser type,
and imports an equal quantity, mostly for apparel and knitwear/carpets.
The apparel industry uses about 32,000 tons of the imported wool (mostly
\<22 microns), and the rest is used by the knitwear and carpet industry.
Due to low domestic processing costs and lower tariffs for raw wool
vis-à-vis processed wool, most of the wool is imported in raw greasy
form, which is scoured, combed, and carded for spinning and weaving. The
peak demand for wool is during March through June, as industries start
processing wool for final use before the start of the winter season.

In the **apparel industry**, worsted suiting, shawls, and knitwear
manufacturers use on average 27, 17, and 24 percent of the wool imports.
Most of the branded wear manufacturers are vertically integrated and
cater to high-income domestic consumers and exports. They are more
quality-conscious than those catering to the medium and lower segments
of the domestic market, who blend fine quality wool with mediocre wool
to cut costs. They are interested in reliable suppliers of consistent
quality, low cost wool. Because of the high credit risk involved in
supplying wool directly to mills and processors, most exporters operate
through established agents or consolidators who are familiar with the
industry.

The **carpet industry** consists of producers of hand tufted, hand
knotted, and machine tufted, the first two mostly catering to exports.
The preference, typically, is for 30-50 microns, pastel to
white--colored wool. Weaving and spinning are mostly done separately,
except by a few composite units, where the operation is integrated. This
segment offers very little opportunity for US wool exporters,
considering the quality of wool required and vis-à-vis the available US
quality, which is higher.

The **knitwear industry** typically uses wool of 26-28 microns. This
segment consists mostly of small units, except for a few large, branded
manufacturers and exporters, who mostly depend upon agents or
consolidators for their wool requirements.

# II. Opportunities and Constraints 

Australia is the major supplier of finer raw wool to the
knitwear/hosiery segments, followed by South Africa. New Zealand
supplies mostly coarser wool. Chile, Brazil, and China also have
recently entered the Indian market, although their market share is
likely to remain limited due to inconsistent quality and unreliable
supplies. According to industry sources, the supply of 26-28 microns
wool is shrinking from Australia, the major supplier, on account of
better returns realized in the finer micron category. Due to the
apparent current short supply situation in Australia, Indian knitwear
wool importers are looking for alternative cheap supply sources for
blending with limited high-priced Australian supplies. This provides an
opportunity for US wool exporters, who may wish to work with Indian
agents.

# Table 1: Quality Attributes of US Wool Vs. Australian Wool

+--------------+-----------------------------+------------------------+
| > *          | > **Australian Wool**       | **U.S. Wool**          |
| *Attribute** |                             |                        |
+--------------+-----------------------------+------------------------+
| > Feel       | > Wool of the same micron   | Wool of the same       |
|              | > feel finer                | micron feel coarser    |
+--------------+-----------------------------+------------------------+
| > Yield      | > 70 -- 75 Percent          | 50 -- 55 percent       |
+--------------+-----------------------------+------------------------+
| > Wool Top   | > 90-95 percent             | About 80 percent       |
| > Yield      |                             |                        |
+--------------+-----------------------------+------------------------+
| > Color      | > Mostly white              | Mostly creamy white    |
+--------------+-----------------------------+------------------------+
| > Vegetable  | > 0 -- 1 percent            | 2 percent              |
| > Matter     |                             |                        |
+--------------+-----------------------------+------------------------+
| > Black Hair | > Very few to nil           | Not countable          |
+--------------+-----------------------------+------------------------+
| > Colored    | > 5 per 100 gram            | Not countable          |
| > fibers     |                             |                        |
+--------------+-----------------------------+------------------------+
| > Fiber      | > 3 -- 5 inches             | 2 -- 4 inches          |
| > Length     |                             |                        |
+--------------+-----------------------------+------------------------+

Source: Informal poll of Indian Industry

According to industry sources, Australia supplies almost 95 percent of
apparel wool imports. Consistent supplies, reliable quality, higher wool
top yields, longer fiber length (3-5 inches), white color, low vegetable
matter, and very low black fiber content are the major positive
attributes of Australian wool, which helps it to command a premium over
US wool (see Table 1). Additionally, Australian quality/grade
certificates are more detailed, instilling more confidence among Indian
agents. Australian wool exporters also informally provide a discount for
any quality deviations from the contracted-for specifications at the
actual user's premises.

The major problem with US wool, according to industry sources, is
variable wool top yield -the major factor in determining profit margins
in the wool processing business. This is due to high vegetable matter
content and short fiber length, and could be solved by proper
classification (fleeces, bellies, and pieces) at the farm level.
Official testing and certification for wool top yield could be another
alternative.

Fiber thickness (measured by its diameter) and its feel are other
price-deciding factors in the wool trade. Fiber diameter is tested and
averaged out among pre-decided samples taken from the same lot. While
trade takes place on the basis of the average micron measurement of the
lot (as certified), it is the feel of the fiber that decides its end
use, which in turn determines its top price. The coarser feel of the US
wool is attributed to wide within-lot fiber thickness variations, due to
mixing of unsorted wool from different sources to make a particular lot.
A slightly darker shade and high colored fiber content in US wool are
also perceived to be negative factors, resulting in a lower price. While
the problem of darker shades in wool is genetic, the color fiber count
could be controlled by careful sorting and cleaning at the point of
shearing.

The U.S. quality certificates are perceived to be not as detailed as the
Australian. Providing detailed information about wool quality would help
instill confidence among Indian buyers, thus offering them an alterative
supply source for quality wool.

# III. Marketing Channels 

An "agent-importer", who usually works exclusively for an exporter,
imports the greasy wool (see Figure 1). Working with a single importer
makes it easier to adjust payment terms if the sample and the delivered
lot differ in quality, and aids the exporters in offering better
after-sales service. Agent-importers offer a credit line of 15 to 30
days to their clients, in some cases even up until the final stages of
manufacturing. Like other major suppliers such as Australia and New
Zealand, US exporters should concentrate on building supply lines and
establishing quality designations for major blends, especially in the
worsted and knitwear sectors.

# IV. Market Access 

Greasy wool attracts a tariff of 5.1 percent, and wool tops are subject
to a 15.3 percent duty. There are no non-tariff trade barriers
applicable to wool imports, nor are there national standards. Traders or
agent-importers typically open irrevocable/confirmed letters of credit
(LC), with payment terms ranging from 90 -- 180 days. Depending on the
reputation of the importing party, some exporters might also accept a
Usance LC with payment terms extending up to 180 days, or Cash Against
Documentation basis. Payments are mostly made on delivered quality
basis, though some do pay on sample basis. Importers of US wool
mentioned that quality differences between the sample and the actual
delivered product have created payment problems in the past.

Both Indian and multinational banks finance wool imports. The
international exposure and connectivity to international financial
clearance systems, such as SWIFT, make it possible for multinational
banks to transact business on behalf of their Indian clients.

# 

# V. Key Industry Contacts 

**[Wool Importers/Agents:]{.underline}**

Mr. Umeysh Shroff

S-410, Greater Kailash Part II

New Delhi -- 110 048

Phone: +91 11 2647 7060

Fax: +91 11 2647 7775

Mobile: +91 98100 63039

Email: <ushroff@del3.vsnl.net.in>

Mr. K. R. Menon

M/s Damodar Menon Int Pvt Ltd

302, Surya Kiran Building

19, Kasturba Gandhi Marg

Connaught Place

New Delhi 110 001

Tel: +91 11 23312208

Fax: +91 11 23320553

Mr. Nishant Chandra

M/s Wool Sheel Traders International

C-12, Gulmohar Park

New Delhi 110 049

Tel: +91 11 26964705

Fax: +91 11 26963664

**[Wool Industry:]{.underline}**

Mr. Arun Seth

Seth and Seth Associate Spinners

Gali Murgi Khana

Batala Road

Amritsar -- 143 005

Punjab State

India

Phone: +91 183 2275 624

Fax: +91 183 255 3225

Mobile: +91 98140 50470

Mr. Rajesh Arora

Lakhmi Woolen Mills Limited

Katra Ahluwalia

Amritsar -- 143 006

Punjab State

India

Phone: +91 183 254 4793

Fax: +91 183 254 2088

Mobile: +91 98159 50483

Email: <rajesharora1@hotmail.com>

Website: [www.lakhmi.com](http://www.lakhmi.com/)

Mr. Virendra Sharma

Oswal Woolen Mills Limited

G.T. Road, Sherpur Bye-Pass

Ludhiana 141 003

Punjab State

India

Phone: +91 161 2545772

Fax: +91 161 2542509

Email: <vsharma@owmnahar.com>

Mr. Naveen K. Jain

Gauttam Woolen Mills

962, Purana Bazaar

Near Shahi Dawa Khana

Ludhiana -- 141 008

Punjab State

India

Phone: +91 161 2700778

Fax: +91 161 2701190

Mobile: +914 98140 23923

Email: <naveenbharat@glide.net.in>, <nitishidh@sify.com>

# Figure 1: Market Channel for imported Wool