Auction wool prices rise as China demand increases

Sheep Central, October 20, 2023

STRONGER buying from China pushed Merino fleece wool prices higher in auctions across Australia this week.

The Australian Wool Exchange said the market recorded a healthy increase this week, driven by solid price rises in Merino fleece types.

“There were originally 43,041 bales rostered for sale and some industry observers feared that the market would struggle with this quantity.

“These fears turned out to be unwarranted as the market opened stronger and then slowly but noticeably increased as the series progressed, AWEX said.

“Worth noting; however, the national offering reduced to 39,157 bales, which was very similar to the previous week, after 9 percent of the offering was withdrawn prior to sale.”

AWEX said the movements in the individual Micron Price Guides (MPGs) for Merino fleece finer than 21 micron ranged between plus 1 and plus 56 cents.

“The AWEX Eastern Market Indicator rose by 11 cents for the week, closing at 1139 cents/kg clean.”

AWEX said the crossbred and oddment sectors went against the trend of the overall market recording losses.

“These falls prevented the EMI from recording a larger increase.

“The market was best described as steady for the entire series and this was highlighted by the movements in the EMI which were plus six cents on day one and plus five cents on day two.”

AWEX said most sellers across the country were prepared to accept the prices on offer and nationally the passed-in rate was just 4.7pc.

“This was the lowest passed in rate since October last year, when the EMI recorded a 52-cent rise.

“Despite the EMI being 184 cents lower than this time last year, the season to date passed in rate is currently 8.9pc, 4.1pc lower than the corresponding sale of the previous season,” AWEX said.

Strong buying orders from China – AWI

Australian Wool Innovation trade consultant Scott Carmody said this week’s auctions produced some good gains within the entire Merino fleece and skirtings market, but unfortunately the carding sector continues to flounder under weak enquiry.

“Crossbred wool types have again softened after months of genuine price enhancement due mostly to improved sales and manufacturer requirements for inventory emanating from within China,” he said.

“Wool grower sellers remain in sell mode, with 95.3pc of all wool offered sold through to the trade.

“The Merino sector was notable in that almost 97pc of those breed descriptions were sold,” Mr Carmody said.

“Most of the passed-in lots came from the crossbred and carding/carbonizing selection.

“The weaker Australian dollar against the US dollar (-0.65pc) certainly aided in the week’s positive results and also lessened the blow to the depreciating levels.

“The Chinese yuan and Euro also went to the favour of the local AUD prices, so most end users received a buffer against the generally stronger prices being paid at auction,” he said.

Mr Carmody said the clearer picture of current wool demand arises from the predominantly Merino (98pc) market in Fremantle, Western Australia.

“The WA indicator (WMI) in AUD appreciated 2pc for the week, which represented price gains of 35 to 45 cemts/kg clean.

“In USD, the indicator shifted 1.3pc higher, which more accurately reflects the willingness of overseas users and local buyers to accept and absorb the higher levels for the time being,” Mr Carmody said.

“Strong buying orders/indents from China – and to a lesser extent India and Europe – forced enough additional competition into sale rooms this week to see Merino prices reverse the downward trend.

“Traders remained keen to secure some supply, but sold levels dictated that the larger part of the offering went to the buy order operators,” he said.

“Direct buying for first stage manufacturers remained subdued, compared to their normal activity.”

Mr Carmody said the latest news from China is that their economy grew at a faster than expected rate in the third quarter.

“This suggests that the Chinese government policy measures are helping to initiate a tentative recovery to the world’s second-biggest economy, and the primary market for Australian wool.”

Next week the national offering is forecast to increase, with 42,117 bales expected to be offered in Melbourne, Fremantle and Sydney.

Click here to see the latest AWEX Micron Price Guides.

Sources – AWEX, AWI.


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