AUSTRALIA’S wool market continued to defy shipment and finance issues associated with China’s coronavirus outbreak last week, as growers’ desire to sell matches buyer demand.
AWEX senior market analyst Lionel Plunkett said the Australian wool market has managed to record overall positive movement this week, as concerns over global health disruptions were largely alleviated.
“Many exporters were concerned one possible effect of the coronavirus, would be the inability of overseas customers being able to open letters of credit, due to bank staff being unable to attend work.
“These concerns were unfounded; however, as the letters of credit started flowing through, opening the way for exports to be shipped,” he said.
“Buying confidence increased once exporters confirmed that it was “business as usual”.
“This stronger buyer sentiment resulted in spirited competition in the auction rooms across the country,” he said.
Mr Plunkett said the Melbourne auction opened proceedings on Tuesday with a stand-alone offering of New Zealand stored wool.
“As these wools are not included in the make-up of the individual Micron Price Guides (MPGs) the AWEX Eastern Market Indicator remained unchanged for the day.
“Sydney and Fremantle joined Melbourne on the second selling day, as the offering returned to Australian grown and stored wool,” he said.
“Main buyer focus continued to be on the better style wools, particularly those with favourable additional measurement results, strong demand on these types helped to push prices up by 40 to 100 cents over the series.
“Lesser style lower yielding wools and those with poor additional results did not attract the same support, losing ground as the series progressed,” Mr Plunkett said.
“The gains in the better wools, outweighed the losses in the poorer wools, resulting in overall increases in the MPGs across the country of between 6 and 74 cents.”
He said the Western region selling last posted the largest gains due to the continually rising market.
“On the back of these rises the EMI gained 13 cents for the series, closing the week at 1581 cents.”
Willing sellers meet market to keep wool flowing
Jemalong Wool managing director Rowan Woods said after opening strongly in the initial sales after Christmas, the market has been tracking sideways due to the coronavirus
“This week it seems we have put that aside and it has started to track upwards again, most noticeably in Melbourne and the (NCWSBA) auction sale was probably the beneficiary of a good solid market here and then the spectacle of this special event and away it went.”
He said the market has been supported by the buying of major top makers Tianyu and Modiano.
“It has also been kept up by the fact that sellers have been sympathetic to the fact that we have a problem and we don’t want to overload the market.
“Sell if you need to, don’t sell if you don’t need to, and we will recover from this problem and the market will be strong again.”
Shortly after the coronavirus outbreak began, growers were withdrawing wool from catalogues and from sale on auction days; however, growers are now storing wool and passed-in rates at auctions have dropped. The passed-in rate for the 40,891 bales offered this week was 11.3pc.
“People who are putting wool on the market now are willing sellers and if you are a willing seller the market is probably in a pretty good spot – 21 microns at 1800 cents every day of the week.”
Mr Woods said the news from China is that mills are trying to get back to work despite the virus outbreak although the country is still in a state of shutdown still.
“But what we are seeing is buyers are getting orders, they are buying to those orders and wool is being shipped out of store, so I think while ever we are not overloading that market we can manage at the moment.”
Elders National Wool Selling Centre manager Simon Hogan said he believed some shipments to China were scheduled for early March.
“They are still doing business out of China, so to me that is a sign that greasy stocks are low.
“We are getting reports that most mills are now back and are working at some capacity, so the signs are positive that things are starting to move,” he said.
“But there are some headwinds there – the Letters of Credit are pretty slow, the cashflow coming back, the delay in shipments and mills not being able to get staff, the ability to transport wool around within China.
“So there are a few hurdles there, yet the market is holding up and is really healthy,” Mr Hogan said.
“So let’s hope we are starting to come out the other end of it now and getting back to more normal circumstances.”
Mr Hogan said last night most of the exporters were positive and the Western Australian auction market finished pretty strong.
“But in saying that, everybody is watching the news out of China pretty closely and it’s a week-by-week situation.”
Australian Wool Network managing director John Colley said the auction market was “defying logic at the moment” with a lower number of LCs being available out of China.
“Smaller quantities (of wool offered) have been a good thing for the market, so there has been a little bit of an increase in demand and people have been prepared to buy wool at around these prices and take the shipping.
“It may alter for a stronger market when we get to a point in the future when we’ve got stable trading conditions.”
Mr Colley said there was a “small growers’ stockpile” in stores and there were some excess tops in China at the time of the virus outbreak.
“We are still operating week-by-week.
“There are still delays in shipping and there have been delays in transport,” he said.
“The logistics of actually shifting the wool from Australia to China has been delay and it just lengthens out the whole process and that’s probably going to take at least 5-6 weeks on the assumption that everybody is back at work (in Chinese mills) by the first week in March.”
Click here to see the latest AWEX Micron Price Guides.