New Zealand to launch its first online wool trading platform

Sheep Central, May 14, 2018

NEW Zealand’s first online wool trading platform will hold its inaugural sale on May 22, focussing initially on selling coarse and slipe wool.

The Natural Fibre Exchange has initial commitments of about 6.5million kg for the first year from its major shareholders and producers of slipe wool, which is wool removed from a slaughtered sheep’s skin.

Crossbred wools have started to recover recently but the NZ Minister for Primary Industry’s March 2018 situation and outlook report said export volumes are rising, “but there are still large inventories built up from the previous season and demand for crossbred wool remains low.”

NFX Ltd shareholders Wools of New Zealand Ltd and Alliance Group have teamed with the designer and manager of the Global Dairy Trade platform, CRA International, which developed and will manage the NFX platform.

WNZ chief executive and NFX spokesperson Rosstan Mazey said NFX intends to bring additional shareholders on board over time.

“The NFX draws on international models as an open access, independent trading platform and represents a cross section of the wool market.

“There are a number of in-built features to the platform that ensures the NFX is pro-competitive, transparent and encourages fair discovery of prices for the fibre products traded between buyers and sellers.”

Most wool in New Zealand is sold in traditional physical auctions, via tender or direct sale, with a trend towards future contracts. However, Mr Mazey said the shareholders believe there will be some immediate and certainly long term cost savings with the NFX platform for buyers and sellers.

NFX sellers’ fees have been confirmed as:

  • NZ5 cents per clean kg of greasy tested wool sold
  • NZ5 cents per kg of scoured tested wool sold
  • NZ4.5 cents per net kg of slipe wool sold (tested or untested)
  • NZ3.7 cents per net kg of greasy untested wool sold

Opportunity for wool and fibres from other sources

Mr Mazey said the primary focus of NFX is on servicing New Zealand wool buyers and sellers, though it has been developed to enable wool from different origins to be sold.

“To date, we have not formally had any discussion with Australian wool entities.

“There is certainly opportunity to do so in future.’

Mr Mazey said there is the possibility for fine wool to be sold from the outset.

“The NFX has been set up in such a way to enable other natural fibres to be sold on the platform in the future.”

Mr Mazey said there is also significant potential for links with other platforms, such as Australia’s AuctionsPlus.

“Again, we are focusing on building the platform first and will look at other opportunities as we progress.”

NFX is part of evolution toward efficient wool selling

Online trading is playing an increasingly important role in international commodity markets, Mr Mazey said.

“This platform is a natural evolution towards developing the most efficient means of selling significant volumes of wool.

“Buyers in turn can compare all prices in real time with all parcels of wool available simultaneously over multiple rounds of bidding.”

Mr Mazey said an integral feature of the platform was as a tool to provide an objective reference price for buyers and sellers.

NFX will operate bi-weekly trading events on Tuesdays. All products in a trading event will be on offer simultaneously over multiple rounds of bidding starting at 2pm New Zealand Time and continuing until there is a round with no new bids. NFX is open to all industry parties and service providers who meet the requirements of the NFX Participation Agreement to be a seller and/or a buyer. Buyers must have pre-approval from a seller to bid on that seller’s products.

Buyers will have signed participation agreements and are contractually obligated to conclude the transaction – just as they would be with a traditional auction, Mr Mazey said.

The bidding website will open 48 hours prior to the start of the trading event to provide information on all the lots available for sale including relevant testing and certification of the lots. It will also include the buyers’ eligibility, or maximum buying limits, across all the lots

Mr Mazey said sellers set reserve prices and any restrictions on buyers. All wool parcels would be offered simultaneously over multiple rounds of bidding, with buyers winning on the highest price offered.

“Bidding continues until there are no new bids,” he said.

“Except for the last bidding round of the trading event, no product is awarded or won at the end of a bidding round.

“At the end of each round, the highest bids for each lot are disclosed and all buyers can bid again in the next round to become the buyer with the highest bid price for the round, i.e. the standing high bidder.”

Mr Mazey said bidders must actively bid, or have standing high bids, in each round to retain their eligibility to continue bidding in future rounds. Bidders without standing high bids cannot stop bidding and return at a later round.

For more information on the Natural Fibre Exchange click here.


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