AUSTRALIAN wool prices last week surged to levels not seen since early March 2023, with industry contention as to whether the movement is supply or demand driven.

The Australian Wool Exchange said the benchmark AWEX Eastern Market Indicator finished at 1319 cents/kg clean, its highest level since March 2023.

AWEX said the Australian market clocked up its eighth consecutive weekly rise, the longest weekly rally in 6.5 years.

“On a daily basis, the rally has now run for 14 straight seasons, the longest stretch since 2011.”

AWEX said auction volumes remain tight, with total offering figures sitting at 246,305 bales for the first eight auctions, down 8 percent on the previous season, but still ahead of the 2019 and 2020 seasons. Brokers offered 27,544 bales last week, 2050 fewer than the previous week, and 2.6pc were passed in.

AWEX said the gains were across the board in the Merino sector last week, with rises of 30-40 cents clean commonplace.

“The 17 microns were a standout, adding to their previous gains with an increase of 57 cents in Melbourne and 69 cents in Sydney.

“Despite the recent gains, the 17 micron MPGs are still trading around 1000 cents below their peak in 2022,” AWEX said.

“Sellers remain keen to capitalise on the rally, driving the clrearance rate to a 12-month high of 97.4pc.”

AWEX said Merino skirtings tracked a similar path to the fleece typ3es, increasing sharply over the two days, particularly for best length low vegetabl3e matter types on the back of strong buyer support.

AWEX said crossbred wools are now at as 4-5 year high after firming 10 cents clean, continuing on their steady rally of the past 12 months. Merino cardings were generally 10-20 cents dearer for the week, with odd pockets 30-40 cents higher.

At the annual Wool Week forum in Melbourne last Thursday, Australian Council of Wool Exporters and Processors president Josh Lamb said margins in the supply chain continued to be under pressure due to global economic conditions, conflicts and tariff impacts affecting demand for wool and consumer goods in general.

“China is still very very flat, there’s certainly no joy there.

“Although the market has obviously improved over the last month, it’s hard to see that anything has fundamentally changed there at the moment; it’s certainly very much supply-driven.”

Demand-driven amplified by supply pressure – AWI

Australian Wool Innovation’s market report said the basics of any spot commodity trading environment suggests markets mostly go up when demand outstrips supply.

“Demand or inventory requirements ex-China since COVID have revolved around the 270mkgs to 280mkg.

“This was indicative of a period of stable demand under a subdued pricing period,” AWI said.

“Now that production is forecast to be a few percent under that five-year average and demand remains unchanged then this is a demand driven market that is being amplified by supply pressure.

“To say that it is just supply forcing the better levels is too simplistic,” AWI said.

“Additionally, are we are seeing the green shoots of new demand as the economic and consumer conditions start to slightly improve.

“Also, is the natural fibre story starting to bite a bit deeper and value starting to be placed on that narrative?

Auction volumes rise by about 7pc this week with just over 29,000 bales being rostered to sell. Auction sales remain to the same schedule and will be on Tuesday and Wednesday, with Fremantle selling just on Tuesday.