Australian wool market consolidates further after wild ride

Sheep Central, September 20, 2019

AUSTRALIA’S wool market has consolidated this week despite a lift in the bale offering.

AWEX senior market analyst Lionel Plunkett said the benchmark Eastern Market Indicator added 7 cents for the week, closing the week at 1542c/kg clean.

Brokers presented 30,135 bales, 8296 more than last week, and 10.4 percent of offering was passed in. Mr Plunkett said compared to this time last year, the national bale offering is down by 21.4pc, or 73,762 bales.

Due to the $A-$US exchange rate dropping to US67.9 cents, the EMI in $US terms fell by 9 cents to US1047c/kg.

“After the rollercoaster ride the Australian wool market has been on over the previous few weeks, this week’s auction provided what many industry members were hoping for, a solid week in which prices were consolidated,” Mr Plunkett said.

He said the Melbourne market rose rapidly on the second selling day of the previous sale to be well above those of the other centres.

“For this reason, the Melbourne sale recorded losses on the first day this week, bringing prices more into line with Sydney and Fremantle.”

He said the southern market indicator fell by 22 cents on the back of these losses. The Sydney region did not sell on the final day of the previous week, and prices needed to rise to come into line with Melbourne and Fremantle.

“On the first day of selling in Sydney, the individual Micron Price Guides (MPGs) generally rose by 35 to 55 cents, pushing the northern region indicator up by 22 cents.

“With one centre up and the other down, there was a minimal change in the AWEX Eastern Market Indicator (EMI) of 4 cents,” he said.

“The second day the MPGs in all centres rose, generally by 5 to 15 cents.

“These increases helped push the EMI up by 11 cents.”

Mr Plunkett said the skirting market attracted strong competition, pushing prices up by 30 to 50 cents, making the skirtings the best performing sector for the week.

Market is strong, albeit flat — AWI

The Australian Wool Innovation weekly market report said the week’s sale results were indicative of a strong, albeit flat market.

“Sentiment appears to shifting to the positive.

“Many of our Australian exporters are currently in China for the Nanjing Wool Market conference and the first hand reports are flowing of a surprisingly better business atmosphere than most were expecting,” AWI said.

“Manufacturers appear to be showing and exercising faith at around the current market levels.”

AWI said much of the Chinese interest is for the fine medium Merino (18 to 22 micron) types with only smatterings of bookings reported for the superfine (finer than 18.5micron) Merino types.

“Pre-sale expectations that Melbourne has pushed “too high” last Thursday were ultimately proved correct as that centres pricing for the “bread and butter” Merino types of 18.5 micron and broader dropped off by 40 to 50ac at the commencement of the sales.

“All sale room operators reported that despite the price decaying back towards the Fremantle pricing set at the end of last week, competition from all major players was strong,” AWI said.

“At these price levels, exporters are showing more inclination to hopefully get back to the normal operations of less risk adverse buy and sell strategy.”

AWI said Australian buyers’ lists were well and truly dominated by the locally based trader exporters this week.

“With the “lower” levels of pricing currently in effect, overseas users are currently more inclined to lock into forward contracts rather than use their indent channels.

“Without trying to read too much into it, perhaps this is indicative of improved inquiry emanating from further up the supply chain,” AWI said.

“Hopefully this is the case, as wool tops are needed to be moved on in order for cash to be returned down to the raw purchasing supply side.”

Grower’s expectations impacting supply

AWI said wool-selling growers are continuing to place pressure on the volumes available at auction. The number of sellers continuing to withdraw or pass in their wool is diminishing, with 8.6pc of the initial rostered quantity being withdrawn prior to sales starting as well as the 10.4pc that failed to price expectations.

The annual Nanjing Wool Market Conference kicks into full gear this afternoon and through the weekend at Qufu, Shandong China.

“Thankfully a more positive sentiment will accompany delegates than the price negativity that enveloped our industry just a few weeks ago.”

AWI said this week’s stable market is perhaps the best fillip for the industry following the initial massive losses of three weeks ago and the semi-recovery seen since.

“All sections of the trade, from grower to garment maker are hopeful that the market can act to a stable price structure for a significant time, but history tells us that this is the most unlikely of results to be expected.”

The national bale offering is expected to reduce slightly next week. Currently, there are 29,290 bales rostered across the three centres.

Sources: AWEX, AWI.


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