GLOBAL health concerns around China’s spreading coronavirus outbreak impacted the Australian wool market this week, but a second-day recovery minimised losses.
AWEX senior market analyst Lionel Plunkett said the outbreak has forced multiple countries to enforce travel restrictions, severely impacting the workforces of many overseas mills.
“This has created uncertainty among many large importers of Australian wool, which in turn has affected the buying confidence of local exporters.
“The lack of buyer confidence was immediately apparent when the markets opened on the east coast,” he said.
“The finer microns were the hardest hit, opening to reductions of 80 to 100 cents when compared to the previous sale.
“By the end of the day the individual Micron Price Guides (MPGs) across the country had fallen by 29 to 131 cents, with 18 micron and finer recording the largest losses,” he said.
“The AWEX Eastern Market Indicator (EMI) lost 56 cents for the day, the largest daily fall in the EMI since August last year.
“The sharp drop in prices was met with firm seller resistance, with the national fleece passed-in rate at 48.8 percent.”
Mr Plunkett said the drop in the market prompted many sellers to withdraw their wool from sale, and nationally 25pc of the fleece catalogue was withdrawn prior to sale.
“The reduction in quantity put extra pressure on the lots remaining, which in turn sparked a recovery.
“On the second selling day the market started to recover, recouping some of the losses experienced on the previous day,” he said.
“The MPGs in all three centres added 15 to 65 cents, finishing the series on a positive note.
“The EMI added 28 cents for the day, but still finished in negative territory for the week, falling by 28 cents to close at 1548 cents/kilogram clean.”
Mr Plunkett said the skirtings travelled a very similar path to the fleece, with large losses on the first day, followed by positive movements on the second, and resulting in weekly losses of between 30 and 50 cents.
World’s largest top maker led bidding – AWI
In his weekly Australian Wool Innovation market report, trade consultant Scott Carmody said the wool demand scenario at the close of last week had appeared to have settled and confidence restored somewhat, but this evaporated immediately upon commencement of selling on Wednesday this week.
Restrictions on travel within China and a week’s extension of their annual New Year holidays had signalled the Chinese government’s high concern of the potential impact of the disease and many commentators were comparing it to the 5-month long SARS outbreak of 2003 which played havoc on local markets.
Mr Carmody said the stand-out of this week’s buying activity was the strength of interest emanating from the world’s largest top maker from Europe, Modiano, across the Merino fleece and skirtings. Traders were active and indents from China also played their part.
“The carding sector was completely dominated by local processors, causing traders to fight hard to try and secure quantity.
“When markets, of any type, are affected by such sudden and outside influences as witnessed this week, true demand signals are often shrouded and can lead to false price movements,” he said.
“This week we could gather no clear direction as to what that is as both days of selling produced polar opposites in price trajectory.
“All we can hope for is a quick resolution to the virus and a restoration to health by those affected,” he said.
Next week’s national offering is currently 35,849 bales, with selling in Sydney, Melbourne and Fremantle.
Click here for the latest AWEX Micron Price Guides.
Sources: AWEX, AWI.