Fine Merino wool prices steady as Chinese mills return

Sheep Central, March 27, 2020

AUSTRALIAN Merino wool prices generally regained ground this week in the face of a less favourable exchange rate as competition between major exporters and Chinese buyers improved.

AWEX senior market analyst Lionel Plunkett said after three weeks of consecutive losses the Australian wool market has steadied this week, managing to record small overall increases.

“Due to concerns over the possible disruption to supply, buyers were keen to take ownership of wool while they could.

“The main buyer focus was on the finer microns, pushing prices higher,” he said.

“The individual Micron Price Guides (MPGs) for 18 micron and finer rose by 6 to 39 cents across the country.

“The broader microns did not garner the same support, as a result the MPGs for 21 micron and coarser, fell by 23 to 26 cents for the series,” he said.

“The gains in the finer microns was enough to push the AWEX Eastern Market Indicator higher by 4 cents for the week, to close at 1442 c/kg clean.”

Brokers passed in 14.3pc of the 42,934 bales offered this week.

Techwool Trading battles with Chinese indents

Australian Wool Innovation trade consultant Scott Carmody said massive buyer support from Australia’s largest trading house competed heavily against robust Chinese indent purchasing.

“The result was the chaos of last week has been halted for the time being.

“All this positivity came in the face of a much stronger Australian dollar versus the US dollar which would normally send the local market plummeting further,” he said.

“As with last week’s substantial falls, the US$ EMI ascension this sale series more accurately reflects the demand scenario.

He said this week’s market result was huge, given the US53 cent rise in the USEMI to US854 cents with the 6.5pc strengthening in the Australian dollar, and the precarious global situation.

“Advice has been received from textile leaders in China that states China is now “almost back to full gear operation throughout the nation except in Hubei (province)”, the capital of which is Wuhan,” Mr Carmody said.

“Needless to say, the economy has been hurt and the industry has been wounded.”

Mr Carmody said confirmation was also received this week that the wool auction markets in South Africa have been suspended for 21 days.

“New Zealand has apparently gone down this route as well.

“The International Wool Textile Organisation has announced the cancellation of their annual congress which was originally slated in for Tongxiang, China, thence moved to Brussels and now  moved online for their core meetings.”

Mr Carmody said largest Australian trading house exporter – Techwool Trading — dominated buying lists this week.

“By week’s end this company had secured around 7500 bales at auction across the entire type spectrum and ended up topping buying lists in three of the four wool type sectors.

“This single entity spend represents an estimated $12-$14 million dollar raw wool value wool of the $55 million the industry put back into the growers’ hands this week,” he said.

“Additionally, pugnacious auction competition emanated from China directly.

“Indents flowing from the Chinese mills helped to plug the holes of a market sinking in price falls last week,” he said.

Mr Carmody said European and other non-Chinese interest was again sporadic and restricted at best.

“News this week confirmed the closure of all the wool mills and top making facilities in Italy, but this is far from being their priority concern at the moment in that country.”

Mr Carmody said the better yields were a crucial part of better pricing this week.

“The broader than 19 micron types fell away by 25 cents as the currency ascension put pressure on those commodity types.

“Similarly, the crossbred types drifted 10 cents, as did cardings.”

Mr Carmody said Merino fleece producers were more willing sellers, but it was the crossbred wools that were mainly withheld by grower sellers from sale.

“Auction figures for the season reveal that the current season has seen 957,726 bales sold to the trade which is in stark contrast to the 1,162,631 bales sold at the same time last year.

“This means 17.6pc less moved through the pipeline.”

Next week has around 46,000 bales scheduled for auction.

Currently, there are 45,810 bales on offer in Sydney, Melbourne and Fremantle next week. All selling centres have been moved forward to sell on Tuesday and Wednesday and all three centres are only two-day operations.

Click here for the latest AWEX Micron Price Guides.


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