AWEX wool price indicator hits 5.5 year high on supply concerns

Terry Sim January 12, 2017

Source: AWEX.

AUSTRALIA’S main wool price indicator hit a 5.5-year high yesterday as demand spiked due to supply concerns among major buyers.

The Australian Wool Exchange has reported that its Eastern Market Indicator reached 1413 cents on Wednesday, with the trade reporting strong demand from China, Europe and India for quality Merino wools.

Australian Wool Network auctioneer Kelvin Shelley said the market this week was one of the best he had sold into in a ‘long, long time”.

He said AWN held a tender sale of more than 2000 bales after the last AWEX auction sale just before Christmas last year, providing some Christmas cheer for growers whose shearings had missed sales after being held up by wet weather. About 16 exporters submitted prices in the sale, the first its size held by AWN before Christmas.

“It showed that most Merino fleece types were at least 20-30 cents a kilogram dearer than the final quotes for the final 2016 AWEX week 24 sale, although crossbreds were 10-15 cents cheaper.

“That basis has gone straight into this week and there has probably been more business done since then; over the Christmas New Year period there has been a number of orders placed, especially out of China,” Mr Shelley said.

“With the offerings at the moment, you are looking at 52,000-55,000 bales, but 50-56 percent of it is crossbred fleece and crossbred lambs.

“You take out the Merino skirtings, the crossbred fleece, crossbred cardings and lambs and the Merino cardings, you are actually not left with much Merino fleece at all,” Mr Shelley said.

“So what they are seeing is they’ve got two three-day sales with this week and next week, then it comes back to a two-day sale – so the volume of wool is actually not there in the better quality types.

“For months and months we’ve been saying it is going to dry up at some point and I think that’s what we are starting to see now.”

Mr Shelley said prices jumped on Tuesday, continued on Wednesday and was firmer today.

“But a lot of the times when you see markets like this, you usually see a pretty quick turnaround within a few weeks.

“It usually only last 2-3 weeks and all of a sudden it drops away again and corrects itself,” he said.

“But speaking to most of the exporters over the last couple of days, they believe with that volume issue, this could be around for three or four weeks or more.

“Forward activity is really good for April-May; locked in prices from 19-21 micron have been really good, and they’ve been close to market level, if not better, in some instances.”

Mr Shelley said it was good to see there was a little bit of confidence around.

The demand is mainly coming from China, but also European interest on better types, supported by India.

“China is very strong.”


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