The woollen industry in Wales was at times the country's most important industry, though it often struggled to compete with the better-funded woollen mills in the north of England, and almost disappeared during the 20th century. There is continued demand for quality Welsh woollen products.
Wool processing includes removing the fleece by shearing, classing the wool by quality, untangling, carding and spinning it into yarn, which may be knitted or woven into cloth, then finishing the cloth by fulling, napping and pressing. Spinning and weaving of sheep's wool dates to prehistoric times in Wales, but only became an important industry when Cistercian monasteries were established in the 12th century. Water-powered fulling mills to finish the cloth enabled rapid expansion of the industry in the 13th century, although spinning and weaving continued to be a cottage industry. In the early 16th century, production shifted from south Wales to mid and north Wales. The Shrewsbury Drapers Company in England took a dominant role in distributing Welsh cloth. In the 18th century, there was strong demand for cheap and sturdy Welsh material shipped from Bristol, Liverpool, or the Welsh ports to clothe slaves in the British colonies in the Americas.
During the Industrial Revolution in Wales, the Welsh woollen industry was slow to mechanise compared to the mills of northern England. When railways reached mid Wales in the 1860s they brought a flood of cheap mass-produced products that destroyed the local industry. However, development of the South Wales Coalfield opened a growing market for woollen products from water-powered mills in the south west, which prospered until after World War I. At one time, there were more than 300 working wool mills. The industry went into steady decline after World War I, and only a few mills continue to operate today.