DOMESTIC Chinese retail demand and an empty processing pipeline pushed Australian wool prices to new all-time peaks this week.

Strong demand for all wools up to 28 micron and especially for Merino fleece and skirtings, lifted the AWEX Eastern Market Indicator 40 cents to 1983c/kg clean.

Only 2.2pc of the 30,053 bales offered – 6310 fewer than last week – were passed in, despite wool being dearer for buyers in US dollars, with the $A-$US exchange rate rising 0.43 cents to US75.7 cents and putting the USEMI up 39 cents to 1501c/kg.

AWEX senior market analyst Lionel Plunkett said the EMI has now added an impressive A488 cents over the previous 12 months, an increase of more than 32 percent.

“Over the previous 24 months the EMI has risen by 53pc or 691 cents.

“Another point worth noting, the Individual Micron Price Guides (MPG) for 17.5 all the way through to 22 micron, are all sitting at previously unseen levels,” he said.

Chinese wool pipeline “extremely empty”

Techwool Trading export trade manager Evan Croake is just back from visiting customers in China and said the wool pipeline, especially in the worsted sector for combing wools, is extremely empty.

“No-one is holding any stocks.”

Mr Croake said processing clients are struggling to pass on these prices, but have to continue to buy wool to feed machinery.

“I think in the short term that is going to continue because we’ve got low global supplies of wool.

“Maybe once we see a bit more supply in the spring things might be a little bit different, but definitely in the short term we are going to see a volatile market because everyone is so short on supply,” he said.

Mr Croake the global demand for wool is good, with consistent wool top sales, especially to processors supplying the Chinese domestic garment manufacturing market. It might be difficult to make margins at current prices, but the mills want to keep their plant running with wool, he said.

“It would be very difficult for them (top sellers) to get current market levels, but they seem to be comfortable just to continue to buy wool.

“There is nowhere else in the world that they can go to get it at the moment.”

Mr Croake said Australian wool growers were now enjoying the benefits of demand growth from wealthy middle class Chinese consumers over the past 18 months, with wool back in fashion.

“The growth of the Chinese domestic market over the last five years has been incredible.

“The big difference in this market rise to the rise in 2011 is that a lot of the wool is being used within China, whereas in 2011 they were still heavily reliant on export,” he said.

“This time around domestically they seem to be able to absorb these prices.

“Our Indian and European clients are struggling to absorb prices, but they are being forced to follow the market due to the lack of supply.”

Prices might have hit the top of the cycle

However, the aspirational industry clip benchmark of 2000 cents a kilogram might remain out of reach, despite the three regional AWEX indicators this week lifting 38-42 cents to put the northern indicator at 2033c/kg, the western indicator at 2119c/kg and the southern indicator at 1952c/kg.

“I really feel the market has hit the top of the price cycle – the only thing is how much of a squeeze there is for volume.

“It could hit it (an EMI of 2000c/kg), but it’s not sustainable if it does,” Mr Croake said.

““Long-term these prices are not sustainable; this market is being squeezed due to the small supplies available.

“There are barriers to how high it can go and I really feel we are hitting the price barrier now – I don’t feel we can pass these prices on long-term.”

Mr Croake said there has been a wool supply squeeze over the past few weeks.

“People have been so short on wool, they had to buy, and small volumes over the next few weeks will continue to make that an issue.

“If we see any increase in volume then the market will start to struggle.”

Bullish price tend despite lower yield and style offering

Mr Plunkett said despite this week’s auction offering again consisting of many lower yielding, lesser style wools, the market continued its bullish trend, as buyers continued their aggressive approach, perhaps due to concern over upcoming supply.

“Merino wools received strong support with all types and descriptions posting solid gains.”

He said 17-22 micron wool generally sold at levels 40 to 80 cents above those achieved at the previous sale.

“Interestingly, due to the coarser microns posting the largest increases over the previous three sales, the average price difference between a 19.5 and 22 micron (line), is now only 50 cents.”

Mr Plunkett said skirtings followed a similar path to the fleece, posting healthy gains of 40 to 60 cents.

“Wools carrying less than 3pc vegetable matter and those possessing favourable additional measurement results, enjoying the largest gains.

“A limited selection of oddments recorded general increases of 15 to 40 cents, pushing the three carding indicators up by an average of 30 cents.”

Arcadian clients are happy with prices

Arcadian Wool Brokers clients recorded some top sales in the M47 catalogue this week, led by Berrybank grower Barbara Linley with a single bale of 14.5 micron fleece with a tensile strength of 34 Newtons/kilotex and branded SUPAAAAM that made 2425c/kg greasy.

Arcadian’s top price for Merino skirtings was 1798c/kg for a three-bale line of 15.4 micron AAFMPCS with a tensile strength of 30N/kt from Wayne and Lyn Grant at Macarthur. The Rentsch family from Penshurst took out the top price for comeback fleece — 1450c/kg for 14-bale line of AAACDWNS, measuring 22.9 micron and 100mm long. Top price for crossbred fleece went to Stonybank Pty Ltd from Mt. Mercer for a four-bale line of AAFX measuring 26.5 micron and 100mm that made 1,011c/kg. Arcadian’s top price for Merino lambs’ wool was 1680c/kg for a five-bale line of 16 micron AAAMLMS with an average staple length of 57mm, from Rubenview Pty Ltd at Burrumbuttock, NSW.

There are currently 31,336 bales rostered for sale next week.

Click here for the latest AWEX Micron Price Guide details.

Sources: AWEX, Techwool Trading, Arcadian Wool Brokers.