News

Chinese demand extends Australian wool price rally

Sheep Central, May 8, 2015

wool bales dec15-14Australian wool prices rallied higher this week as Chinese domestic demand for wool strengthened across all categories.

AWEX senior market analyst Lionel Plunkett said the AWEX-EMI accelerated 69 cents higher for the week, extending the recent rally to 12 consecutive sale days.

“In the history of AWEX-EMI daily publication (since 1997) there has only been one other rally which has lasted longer — during mid 2011 — which lasted for 15 consecutive sale days.

“Strong buyer support was evident from the outset on Wednesday with the opening hour quoted at 30 to 50 cents dearer, however the market continued to gather pace over the course of the day and eventually closed 50 to 80 cents higher,” Mr Plunkett said.

“The strong result in all sectors resulted in a weekly pass-in rate of 1.1pc, the lowest on AWEX records (1996).”

Market lifts despite wool being dearer in US dollars

The market lift came despite the Australian-US dollar exchange rate being at US79.79 cents, and the EMI in US dollar terms lifting 54 cents to 990 c/kg clean.

On Thursday, the market consolidated on the previous close and made further increases of 15-25 cents, he said.

“The finer microns — 17, 18 and 19 — were generally in the most demand during the sale and a few of the Micron Price Guides in this range achieved increases of 100 cents or more for the week.

“Support was widespread as buyers scrambled to purchase quantity, generally resulting in a narrowing of the price differentials between the lower spec and the better types, although there were selected ultrafine lots which managed significant premiums,” Mr Plunkett said.

Merino skirtings tended to outperform the fleece catalogue, posting gains as much as 120 cents for the sale.

Mr Plunkett said stylish low vegetable matter content types in the finer microns found the most support.

“Crossbreds were around 3 percent dearer for the sale.

“All three Merino Carding Indicators closed above 1000 cents this week after weekly gains totalling more than 40 cents,” he said.

Stronger domestic Chinese demand driving market

Techwool Trading export trade manager Josh Lamb said the market turnaround was being driven by China.

“Europe has definitely backed off a little bit and India is only just starting to come back to the level now, so it is purely being driven by China and mostly for domestic sales of tops in the China market.”

The credit situation in China has not eased, but Mr Lamb said the major Chinese mills have been working on their finances to be in a better position with banks, getting themselves away from third party credit into a more healthy position.

“Probably what we are seeing now is that starting to sort itself out and they are getting a bit more liquid.”

Mr Lamb said there has been an increase in demand for tops in China – long tops and semi-worsted or open tops – for knitwear.

“That sort of coincided with the quantities dropping off here, like they always do – it has just all come together at once to force the market up.

“It probably goes to show that most mills aren’t keeping much more than 6-8 weeks greasy stock.”

Mr Lamb some of the Merino skirtings increased in price by more than 120 cents, reflecting where the demand is coming from.

“The huge demand is China has been for knitwear and woollen products and that’s driven the skirting and carding markets to unbelievable levels.

“It’s just where the demand is at the moment for what people want to buy out of a store.”

Casual wear not suits driving raw wool demand

Mr Lamb said people in China at the moment were more inclined to buy a jumper or some casual wear, more than they are a new suit, and that is being reflected in the physical wool market.

“I think it probably is here to stay, because it is a bit of shift — a cultural shift in what consumers want.

“Whether or not it stays at these sort of levels or at these differences in the market between fleece and other wools, but certainly that’s where the growth in demand is for wool, there is no doubt about it.”

Growers and brokers have reacted to the market lift by listing 41,849 bales for sale next week, almost 10pc more than the estimate published last Monday.

Source: AWEX, Techwool Trading

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