In 2025, the global wool market is experiencing remarkable price momentum and structural shifts that are reshaping its economic fundamentals. The Eastern Market Indicator (EMI), becoming the benchmark for Australian wool, has climbed steadily throughout the year, breaking levels not seen since 2022 and marking one of the longest consecutive price rallies in decades.
As of December 12, 2025, wool traded around AUD (Australian dollars for every 100 kilograms of goods)1,542 per 100 kg, up more than 35% year-on-year, with analysts forecasting continued strength into early 2026. Chinese demand has been a prominent driver of this price resurgence, with China accounting for about 85% of Australian wool exports—a dominance that underscores the importance of Asian markets for wool sourcing and processing.
Supply constraints set the backdrop for the price rally
At the core of this rally is a pronounced tightening of wool supply. Australian wool production—the world’s largest merino supplier—has contracted significantly due to sustained drought conditions, flock reductions, and structural shifts in sheep farming practices. Production for the 2024/25 season was about 10.4% lower compared to the previous year, with all major wool-producing states showing declines, particularly Western Australia (down nearly 20%).
Supply is expected to remain below historical levels in the upcoming season, driven by ongoing reductions in the national flock and broader agricultural shifts toward lamb and meat production that offer higher per-hectare returns.
Market segmentation- merino vs coarse wool trends
Fine and superfine merino fleeces have been particularly well supported in 2025, showing more robust price increases than broader or coarse wools. This reflects stronger downstream demand from performance apparel and luxury markets, where merino’s technical properties—breathability, temperature regulation, and biodegradability—are key selling points.
However, industry data also show moderate overall volume growth in wool prices on a longer timeframe. From mid-2024 to mid-2025, wool prices rose modestly, illustrating gradual underlying demand recovery phases before the more dramatic gains of late 2025.
Global consumption dynamics and shifting end uses
Beyond traditional apparel and textiles, apparel segments such as baselayers, thermals, and performance gear are driving new wool consumption patterns. Wool’s natural comfort and sustainability advantages increasingly attract outdoor brands and lifestyle labels pursuing eco-performance credentials.
In parallel, specialty fibers such as alpaca are gaining traction, supported by strong consumer demand for soft, durable, hypoallergenic garments. The alpaca apparel market continues to grow globally, with more than 74% of its revenue share generated by apparel and accessories—a trend expected to persist through the rest of the decade as styling and comfort converge.
Investment and trade implications for producers and buyers
For industry stakeholders, the market transformation carries nuanced implications:
- Producers: Higher wool prices in 2025 are restoring confidence among growers and bolstering profitability prospects, even amid lower output. China’s long-term investment interest is reinforcing confidence in wool as a strategic fiber.
- Buyers and brands: Rising commodity costs, particularly for fine grades, are prompting brands to optimize blend strategies, explore alternative protein fibers, and increase investment in traceability and sustainability certifications.
- Exporters: Countries reliant on wool processing, China and Turkey, remain vital hubs in global wool value chains. Meanwhile, traditional processors are adjusting to tighter availability and higher costs, influencing global trade flows.
Sustainability considerations and industry pressures
While wool’s eco-attributes, such as renewability, biodegradability, and natural performance, continue to bolster its appeal, the industry faces environmental scrutiny. Recent research highlights that animal-derived materials, including wool, contribute disproportionately to methane emissions in the fashion lifecycle due to livestock impacts, urging producers and brands to pursue regenerative grazing and lifecycle emissions reductions, according to The Wall Street Journal.
Outlook for 2026 and beyond
Market models suggest wool prices may continue higher in early 2026 amid constrained supply and stable demand growth. Fundamental shifts such as diversification of export markets, enhanced traceability, and premium positioning in performance categories are expected to support this trend. However, broader economic factors—such as consumer spending and global growth will remain key uncertainties.
