AUSTRALIAN wool prices have managed to lift by up to 40 cents in the last week of auctions before the annual mid-year three-week recess.
AWEX senior market analyst Lionel Plunkett said the final meaningful opportunity for buyers and exporters to secure wool and for exporters to finish orders for shipment before August helped keep the market on an upward path.
The AWEX Eastern Market Indicator rose 31 cents to 1754c/kg clean for the offering of 34,080 bales, 3086 more than last week, with brokers passing 6.3 percent.
Mr Plunkett said due to seasonal conditions, the size of the Australian wool clip is expected to decline again this season. When compared to the corresponding sale of the previous season, the amount of wool offered at auction has fallen by 19,350 bales, a reduction of 22.9pc.
“Positive buyer sentiment was again evident from the start of the series, although main buyer focus was on the better style lines and wools with favourable additional measurements, all types and descriptions recorded increases for the week.
“These rises were reflected in the individual Micron Price Guides (MPGs) which generally gained 10 to 40 cents for the series, with the north and west enjoying the biggest lifts,” he said.
Mr Plunkett said the EMI has now risen for both sales of the 2019/20 season, a much-welcomed result after the prolonged run of losses to finish the 2018/19 season.
“The mid-year break is the time many exporters take the opportunity to visit overseas clients.
“The positive movement of the market is timely, as making sales in a depressed market can be very difficult,” he said.
Big Chinese buyers still not buying normally – AWI
Australian Wool Innovation’s weekly market report said some fresh forward sales for relatively prompt shipment from mainly China, and a modicum from other destinations, injected the much needed confidence to keep the market bustling in a positive direction leading up to the annual three-week Winter recess in sales.
“Whilst quantities of concluded business were reported to be at “minimal” levels and prices just at market, it certainly did aid the physical market.”
AWI said by following the market movements of the past weeks, it can be ascertained that the global supply of wool in front of machines is dangerously low.
“Almost all business said to have been written was for prompt or immediate shipments.
“For the market to react as it did to just a nominal restocking by traders and manufacturers, many assumptions and charts are pointing to a rapid rise once consumer retail demand picks up in the northern hemisphere, particularly when tied in with the tightening supply by the lower global wool production,” AWI said.
AWI said this week’s auctions saw the strongest buyer interest turn to the finer end of the Merino offering. Gains of 40-50 cents were commonplace within the super fine (less than 18.5micron) category, with the better descriptions seeing 75 cents added to their values.
“European interests appeared stronger in purchasing intent, but this maybe from trader exporters looking to put a few bales away for the their business partner’s expected buying emerging in the August/September period, which normally is the pattern,” AWI said.
“Obviously supply concerns due to quality issues caused by drought conditions continues to play its part in this decision making, as does the relatively attractive price of these wools when compared to the previous two years or so.”
AWI said wool auction market activity this week was a replica of the proceeding few months.
“Chinese top makers, Australia’s largest manufacturer interest and local Australian based traders took the majority of bales on offer.
“Indeed, the top four buyers in each market sector took around and over 50pc of the volume.”
AWI said indent buying by the two big “guns” from China has not returned to normal and many are now questioning as to whether we have seen a changing of the guard as far as what is “normal” in that assumed buying pattern.
“Supply concerns from Australia are very much reflected by the first sales of the new season,” AWI said.
“Australian auctions have produced just 60,969 bales sold compared to the 74,113 bales last season. “This means that already 17.7pc less wool has flowed up the chain.”
Wool auctions will resume in the week beginning Monday 5 August.