The results of the latest quarterly Woolmark Business Survey suggest that the rise in raw wool prices in recent weeks is being driven by strong demand and price levels could be sustained for several months.

Produced by Woolmark Market Intelligence (WMI), the survey's results, taken at the end of September, show that demand at each stage of the wool textile industry is 'rock-solid.'

In fact the survey, which is conducted among 250 leading wool industry companies around the world, reveals the results in the quarter to the end of September are the best in five years.

"Demand conditions have been quite strong for the last nine months all along the pipeline but what has really triggered the higher than usual prices is concerns about a looming supply squeeze in the first half of 2007 because of the drought," explains WMI chief economist, Chris Wilcox.

Demand has improved steadily at combing since the lows in 2002 to now be assessed as 'normal' to 'above normal' in all regions surveyed.

"The positive demand environment reflects continued favourable retail conditions and fashion trends for wool apparel," says Mr Wilcox. "Plus, low stocks at combing and worsted spinning stages are helping to drive the raw wool prices higher."

Within the global wool textile sector, the result is that combers are busy, reporting high capacity utilisation after years of industry rationalisation. There is good business for worsted weaving yarn spinners, although mills report that the knitting business is softer, especially in the woollen sector.

"All wool will benefit from the stronger demand in the short to medium term," says Chris
Wilcox. "Most of the gains will continue to be seen in merino wool between 19 and 24 micron.

"But, across the board, we would anticipate the raw wool price rise to continue, or at least stabilise, well into the first half of 2007."