Mongolian Cashmere and opportunity
Mongolian economy is highly dependent on fluctuations in world market prices for non-renewable natural resources, which end up being used in a way that is harmful to the environment. It is underground mineral resources such as gold, coal, and other minerals which are severely damaging the pristine environment. However, we have an opportunity that supporting the processing of inexhaustible renewable goat wool and raw cashmere on the ground will make a significant contribution to the Mongolian economy and can create a sector that is competitive in the world market. Now, Mongolia is the second-biggest supplier of cashmere raw materials. Among goats, with well quality called winter goats only found nowhere else in the world except Mongolia and China. Although raw cashmere also produced in Iran, India, Turkey, and Afghanistan, most of the raw cashmere exported from Mongolia and China, as mentioned previously.
In 2019, Mongolia produced 9500 tons of raw cashmere, China produced around 11–12 thousand tons, and other countries produced about 2–3 thousand tons of raw cashmere. Mongolian wool and cashmere industry consist of 300 companies, which most of them export their final products to foreign countries. In 2019, 30 percent of the industry’s total sales were sold domestically, while the remaining 70 percent were exported. More than 50 percent of domestic cashmere product sales are made by foreign tourists. Today, we account for only 30 percent of the world cashmere product market.
The main suppliers of cashmere materials are herders and they are satisfied with the price they sold while cashmere prices have been stable for the last three years. When they preparing their goat cashmere in specially prepared containers, besides cashmere itself need to be free from various dandruff, garbage, and other tangible bacteria. According to market price, usually, fine-grained young goats’ cashmere reaches a high price.
As China’s economy grows rapidly, so does the Chinese income of consumers and the demand for luxury goods. The country’s clothing market is valued at 1.144 billion yuan and is expected to continue to grow so that making a significant market for exporters with a population of more than 1.3 billion.
At first, The British firm “Kering” concluded that the future of this luxury business, which attracts rich people is going to be bad. However, prices are rising not falling since cashmere production supply is declining year by year. Kering company took a survey from Italian, French, and Japanese producers. People may be interested in why they took a survey from them instead of the main 2 countries China and Mongolia. The reason why is they produce most of the final luxury products. Moreover, the numbers we know from the Mongolian wool and cashmere association and the amount produced by china do not fully reflect the amount of full qualitative raw cashmere. Mongolia produced 9500 tons of raw cashmere in 2019, but in reality, after removing hair, dust, and other coarse-grained hairs, only about 90% of raw materials are left ready to make luxury goods. Even suppliers comb 250 grams of raw cashmere per goat, the manufacturer needs four goats to make one shirt. Therefore, in recent years, this figure has fallen sharply, which is worrying manufacturers.
The amount of cashmere produced is still the same but after the first stage of cleaning it is reducing constantly year by year. According to Kering company, they attribute this to global warming. Luxury cashmere is prepared from winter goats. They determined the fact that winter goats are in Mongolia and the northern provinces of China. Furthermore, whether those places significantly warmer than the long-run average during the winter so affects the yield and quality of cashmere. Since weather warms up, the amount of the fine cashmere decreasing, which is responsible for heat retention while the amount of course hair increases. In short, this reached the point where it is a problem for manufacturers, which is the producer of final products. Unfortunately, the economy itself can’t help with global warming so the cashmere supply has been reduced. Despite the number of goats has increased, the heat of cashmere has decreased, thus this means that the supply and yield of luxury cashmere are still declining.
Secondly, demand is growing… Leading companies and artisans in the cashmere industry agree that the supply of fine quality cashmere raw material will not improve in the future, so the price of cashmere products will increase every year. According to Federica Levato, a senior consultant at Bain Company, who makes luxury cashmere garments indicated that luxury cashmere market is recovering. In the large chain stores above the average class, the prices of cashmere products are pretty high in the market in comparison to recent years.
Some cashmere companies producing close substitutes due to falling in fine cashmere raw material. On the other hand, companies that have a scarcity of raw materials begun to produce cashmere yarn with mixed spandex. Nonetheless, it will inflate prices rather than lower the price of cashmere garments. The reason why is luxury consumers are more likely to choose a hundred percent cashmere, even though it is a high-quality counterfeit product. Consequently, rare products have a high value in the theory of books.
What are some of the biggest problems? What could be improved so Mongolia could earn more money?
Mongolia’s opportunity is to manufacture the final goods. Mongolian cashmere is one of the biggest future export sectors of our country. Regrettably, Mongolia manufactures 15 percent of the resources we have today. The rest of the cashmere is processed at the washed level and exported to the Chinese market and the world market, but it is losing a lot of advantages. China and Mongolia export 48 percent of the global cashmere market, while other countries are about 12 percent. However, 15 percent of the raw materials made into final products done domestically. Unfortunately, 90 percent of the processing of the final product by China alone. The total supply of our country is 9000 tons of raw cashmere and costs more than 350 million USD. The good news is that the number of goats has increased more than others in Mongolia, but the figures show that quality is not as enough as at all (supply falling, demand increasing). On the other hand, the world market of cashmere directly related to Mongolia. Pierre Luigi, the executive director of the Italian company “Lora Piano”, said that cashmere production tends to fall during the time Mongolia and Inner Mongolia had dzud (hardest winter for herders ). In addition, the fact that the shortage of cashmere raw material has been decreasing for more than recent 50 years. In such a difficult situation producers find it hard to balance the market. According to them, they buy cashmere almost raw, which cannot be found anywhere except Mongolia and China. Therefore, it is important to pay attention to the high demand in the world cashmere market.
Moreover, even if cashmere yield is declining exporting raw material will not increase profits significantly for Mongolia. Indeed, it can be seen that profits can be increased if processed and the final product is produced in Mongolia. The reason why is, first of all, the world’s production of fine quality cashmere declining which means supply is falling. Secondly, manufacturers are using blended yarns instead of pure cashmere yarns. On the other side, rich people who do not care how much they pay for their luxury, want pure and luxurious goods. This seems like a real golden opportunity for Mongolian manufacturers. Mongolia has decent suppliers of cashmere. But Mongolia’s problem is even we have factory plants it does not have the capacity to exceed to produce all supplies. Thus, we need improvement in our production and manufacturing industry. As a result, we can export not only 30% but also more than that. In addition, last year the USA government reduced the tax on export products from Mongolia which is another great opportunity for Mongolians.
If Mongolia can get the impression that the 100 percent pure luxury cashmere clothes made only in Mongolia, Mongolians have a real opportunity to benefit from the huge amount of markets circulating in the world luxury products.
