Poor demand from China crashes Australian wool prices

Sheep Central, August 13, 2021

GROWERS reacted sharply to lower demand for wool on Australian auctions this week, passing in third of the offering, even after more than 7 percent was withdrawn before sales started.

The Australian Wool Exchange said the market suffered large losses in its return from the annual three-week mid-year recess.

“Wool accumulated over the break pushed the national offering up to 49,181 bales, although the scheduled offering was much higher, as 7.3pc of the original selection was withdrawn prior to sale.

“As the market opened in the eastern centres, it was immediately apparent that the prices on offer were well below those achieved during the previous series,” AWEX said.

“As prices levels fell, so too did buyer confidence, causing prices to continually deteriorate and the week progressed.

“By the end of the series the individual Micron Price Guides (MPGs) across the country had fallen by between 31 and 136 cents,” AWEX said.

As Melbourne was the only centre operating over three days, the largest falls were experienced there, AWEX said. The benchmark AWEX Eastern Market Indicator lost 56 cents for the series, closing the week at 1372 c/kg clean, a 3.9pc reduction.

“Due to a softening of the Australian dollar  — the A$ lost nearly a full US cent compared to the previous selling week — the fall when viewed in US$ terms was even higher, with the EMI dropping by US55 cents, closing the series at US1010c/kg clean, a fall of 5.2pc.”

AWEX said no sector was immune to the falling market. The skirtings followed a similar path to the fleece, general losses of between 50 and 150 cents were felt, with the finer microns most affected.

“In percentage terms, the drop in the crossbred Micron Price Guides was again similar to the Merinos.”

AWEX said understandably, the sharp reduction in prices resulted in a higher than normal passed in rate, and nationally 33.2pc of the offering failed to meet sellers’ reserves.

Poor demand from China – AWI

Australian Wool Innovation trade consultant Scott Carmody said demand from China was poor this week in comparison to the pre-recess sentiment, but other origins such as India, Italy and the Czech Republic showed support similar to pre-recess levels.

“Interest from Chinese first stage processors was lukewarm at best and some usually influential purchasers were noticeable by their absence or weaker than normal buying in-tent.

“Worries surrounding a reported increase in COVID issues within China were mentioned as dampening demand, but the ability to move product further up the chain is proving the current hurdle to jump.”

Mr Carmody said the very high passed-in rates were a feature of the week’s auction activity as grower sellers resisted the lower prices being offered.

“This strong willingness to hold onto product assisted prices falling even lower, as a third of all wool offered failed to meet reserves during the week, and within that, around 40 percent of all Merino fleece and skirting lots were not sold.”

Next week’s national offering reduces, due in part to the drop in the market. There are 41,284 bales currently rostered. Sydney and Melbourne will sell over two days, Fremantle only requires only one day of selling (Tuesday).

Click here to see the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.


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