Australia wool prices fall again as global confidence wanes

Sheep Central, June 21, 2019

Global economic confidence and financing are weighing on wool demand. Image – AWEX.

AUSTRALIAN wool prices fell lower this week as global economic unrest, supply chain financing and cashflow issues were identified as limiting buyer confidence.

AWEX senior market analyst Lionel Plunkett said it was immediately apparent this week that buyer confidence was low with prices across all microns initially discounted by 20 to 40 cents.

“By the end of the day most types and descriptions were selling at levels 40 to 60 cents below those achieved at the previous sale.

“This was reflected in the individual Micron Price Guides (MPGs), which fell by a similar amount.”

As a result of these losses, the AWEX Eastern Market Indicator (EMI) lost 52 cents on the first day of selling and the market recorded further losses on the second day, but not to the same extent.

Some broader MPGs in the Southern region managed small increases as the market found a level.

The EMI closed the week at 1766c/kg clean, an overall loss of 57 cents.

“The EMI is now 350 cents below the record it achieved in August last year, a reduction of 16.5 percent.

“The EMI has fallen 307 cents since the corresponding sale of 2018, a loss of 14.8pc,’ Mr Plunkett said.

The oddment market had an up and down week, losing 20 to 30 cents on the first selling day, then recovering 5 to 10 cents of those losses on the second.

Brokers passed in 12.8pc of the national offering of 19,072 bales, which was 9068 fewer than last week.

Fremantle returns next week for the final sale of the season. Currently, there is 30,872 bales rostered for sale, with selling in all three centres.

Manufacturer financing issues a concern – AWI

Australian Wool Innovation’s weekly market report said buyers reported business was extremely hard to come by.

“Financing issues of our manufacturing customers are certainly a negative factor for demand at present.

“Tight cash flow situations in the middle of the supply chain are hampering fluidity of normal business practice,” AWI said.

The EMI in $US terms lost 43 cents to US1217c/kg, as the $A-US exchange rate dropped to US68.92 cents.

“In $US terms the EMI has not traded at these levels since October 2017, so mills must be getting close to wanting to lock in some volume at these prices, but exporters are most likely still in a risk adverse mode, whereby the extremely low global supply available will prevent too much forward exposure being sought,” AWI said.

“Overseas manufacturers waited out of the local market whilst prices headed all to their favour.

“This is not to say they are reaping a big bonus, as business for them out the other end of the chain is also being stymied by the unknown whims of consumer demands.”

AWI said the ongoing tariff wars, Brexit and the general decline of the global economy is playing a weakening game on almost all commodity and financial markets.

“Movement of tops, carbo and yarns through to fabric and out to garments on the shelf is now essential for a return to relatively predictable demand for the entire greasy wool sector.

“When this occurs, it will then assist to mobilize local buyers to accumulate the stocks necessary to supply their raw wool customer with steadier supply at a more stable price – in theory.”

AWI said the local trading companies led the buyers’ lists across all sectors this week, bar the carding types, which had the largest processor of those types dominant.

“The lowering prices has seen confidence build slightly and by weeks end the sentiment had lifted somewhat out of the gloom that has existed the past three weeks.

“Whether this positivity remains and recovers for the final three sales pre the winter recess is hypothetical, but given Australia is basically on its own for as far as global supply goes for the next

seven weeks, it surely has every chance to do so for those that believe supply will rule over demand for the immediate future?”

AWI said there was again very little interest from the largest of the Chinese indent buyers, but the operator that emerged at the end of the previous week, continued their support of the market through into this week.


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