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Australian wool prices have climbed sharply in early 2026, with the benchmark Eastern Market Indicator (EMI) rising 38% year-over-year, driven by strong purchasing activity from Chinese mills and a structural decline in global wool supply. The rally marks a dramatic reversal after three years of subdued prices and signals a new era of competition for the world's finest natural fibers.
As of mid-March 2026, the EMI stands at 1,751 cents per kilogram, according to data from the Australian Wool Exchange (AWEX). Superfine Merino types are commanding premiums well above that baseline, with 18-micron wool trading at 2,311 c/kg and 19-micron lots fetching 2,173 c/kg.
The indicator reached its highest point since June 2019 before easing slightly in the most recent auction series. According to Sheep Central, finer Merino types in the eastern markets gained 30 to 35 cents during the week of March 13, even as the market absorbed a significantly larger offering of 45,476 bales.
Scott Carmody, head of domestic operations at Australian Wool Innovation (AWI), noted that price rises for 2026 have been "much stronger than many in the trade thought," with all wool types gaining between 5 and 20 Australian cents per clean kilogram, as Fibre2Fashion reported.
The dominant force behind the rally is renewed buying power from Chinese textile manufacturers. At recent Australian auctions, Chinese direct mill buyers secured 48.4% of all Merino fleece sold. In Sydney, a single major Chinese top maker acquired more than 36% of the Merino fleece offered on the final auction day, underscoring the scale of demand from the world's largest wool-processing nation.
Kelvin Shelley, Victorian manager at Australian Wool Network (AWN), confirmed that "new business from China is definitely the main driver of the market." Industry observers point to growing Chinese consumer interest in next-to-skin woolen garments and government uniform procurement as key demand segments.
Beyond China, positive signals are also emerging from Europe. Italian mills, which had been working through an oversupply of processed wool that built up during the post-COVID period, are now returning to the market as that pipeline has cleared. The broader Merino wool market, valued at approximately USD 3.58 billion in 2024, is projected to reach USD 5.12 billion by 2033, growing at a compound annual rate of 4.5%, according to Verified Market Reports.
While demand is strengthening, analysts say the more powerful driver of the price rally is a deepening supply crunch. Josh Lamb, president of the Australian Council of Wool Exporters and Processors, told Stock & Land that the market rally was "probably more off the back of supply concerns," adding that tighter supply "is likely to be the case for quite a while yet."
Several structural factors are constraining output. Australia's sheep flock has declined to approximately 63.7 million head, and greasy wool stocks remain well below normal levels. Dry conditions across key pastoral regions continue to put pressure on sheep numbers, while competitive sheepmeat prices are incentivizing producers to prioritize lamb production over wool. Shearing labor shortages are adding further cost pressures.
Critically, this is not an Australia-only phenomenon. Wool production is also falling in South Africa and Uruguay, two of the other major fine-wool producing nations, making the supply contraction a truly global challenge. Three years of low returns drove structural change across the Australian wool industry, reducing the national clip to a point where even modest demand recovery creates significant upward price pressure.
For brands and consumers in the luxury textile space, the implications are significant. The combination of constrained supply and growing demand -- particularly for superfine Merino in the 15- to 19-micron range favored by premium fashion -- means that sourcing the finest fibers will become increasingly competitive. Brands that have established long-term relationships with growers and supply chain partners are better positioned to maintain quality and consistency in this environment. VIONIS路XY, for instance, sources exclusively 100% Australian Merino wool for its knitwear collections, a sourcing model that relies on precisely the kind of stable supply partnerships now proving essential.
The Asia-Pacific region now accounts for nearly 47% of global wool market revenue, and Australia alone produces over 300,000 tonnes of greasy wool annually, with 70% exported to premium manufacturers in Italy, China, and Germany. As sustainability-conscious consumers continue to favor natural, biodegradable fibers over synthetics, the structural demand for Merino is expected to remain strong.
Industry analysts caution that if demand picks up even modestly from current levels, all conditions are in place for another significant price increase. With global stocks depleted and no near-term prospect of a substantial increase in sheep numbers, the market appears to be entering a period where premium Merino wool products will command -- and justify -- premium prices.
Published: March 21, 2026
About VIONIS路XY
VIONIS·XY sources 100% Alashan cashmere and 100% Australian Merino wool to craft premium knitwear that honors traditional fiber origins. Learn more at vionisxy.com.
