E-News subscription
Product Enquiry
Cashmere: Supply, demand and rising prices
FNA | 18 August 2011

The China phenomenon

Industry insiders call cashmere “soft gold” and “diamond fiber”— and such nicknames reflect the luxury and wealth inherent in the finished products manufactured from this most noble of fibers. Produced from the wool of cashmere goats, the cashmere fiber has been a sign of wealth and luxury for millennia. And the perfect place to cultivate cashmere? Northern China.

Cold, dry winters in China’s Inner Mongolia cause cashmere goats to grow thick, warm coats, creating high yields for the Inner Mongolian cashmere industry centered around the city of Ordos.. Chinese cashmere factories, many located in this Northern Province, produce between 70% - 75% of the global cashmere supply. This market share is worth between US$770 million and US$924 million.

Although the majority of the produce of these factories was traditionally exported to affluent Western countries, increased individual affluence in China has correspondingly increased domestic demand for the fiber.

Fortunately for cashmere producers, increased Chinese demand has helped ease the effects of the Western recession. Last year, 2010, the number of Chinese-made cashmere sweater exports was only 12 million — down one-third from 2007 export figures.

Lower export rates have not adversely affected goat herders, though. Increased domestic demand combined with a recently lean supply of raw cashmere due to climate and husbandry-related issues have made the price of raw cashmere skyrocket.

For example, the price for raw cashmere increased by 50% in Mongolia in the first quarter of 2011 and David Lee, a cashmere expert from Cashmere Fibers International based in Bradford, UK, stated on his web site that prices in Afghanistan had reached levels not seen for thirty years.

For goat-herder Meng Lounu, 77, and his family, the rising prices have brought fortune beyond their wildest dreamed.

“Our standard of living gets better and better,” said Meng.

The family makes one million yuan per year (US$155,000) selling raw cashmere to Inner Mongolian factories. Their increased revenue has allowed them to purchase a new truck and build several new cement houses for family members.

“Before, our life was bad,” said Meng. “Now it’s great. We can eat as much as we want —we make more and more money.”

While this burst has been a windfall for raw cashmere producers, cashmere factories are feeling the pinch. As the industry increases in size, more Chinese factories are turning to cashmere production. This new competition plus increased raw material prices are hurting older cashmere factories’ profit margin.

But this struggle at the production level doesn’t directly affect Chinese consumers. In Beijing and Shanghai, 100,000 cashmere sweaters sell each year. In addition, the decline of some 6 million sweaters in exports in the last three to four years indicates that Chinese consumers have “discovered” cashmere as a status symbol and as a product, which due to its feel good qualities, lightness and warmth, fits in with the self-gratification element evident in luxury purchases by the “nouveax riches classes” springing up in China’s cities.

The improving standard of living of former nomadic herdsmen and their families is being driven by demand in the cities and rising prices after the economic downturn experienced in 2009. International organizations, such as USAID, are providing funding to help develop the cashmere goat breeding industry in many parts of Central Asia.

Supplies are being gradually increased from countries such as Kyrgyzstan, Tajikistan and Kazakhstan as expert advice is forthcoming from organization such as the Odessa Centre. There is little or no government support for this fledgling industry in these countries and longer term they could be instrumental in supplementing existing supplies as demand continues to grow in the west and more especially in China.

The issues raised in this article will be discussed by experts at the Cashmere World Conference due to be held during the Cashmere World fair from October 26th – 28th at the National Convention Center in Beijing. You can register to attend this key event of the international cashmere industry by clicking here.

Source information - Taipei Times. Additional material by Richard Smith