News

Strong demand for clean and sound wool

Terry Sim, April 29, 2022

 

AUSTRALIA’S logistically challenged wool market was boosted by strong demand for clean sound wool to seemingly reverse its downward trend this week.

The Australian Wool Exchange said the market recorded an overall positive movement for the first time in six sales series, on resuming after the annual one-week Easter recess.

AWEX said although there was an accumulation of wool over the break, sales were restricted to two selling days, due to the Monday Anzac Day Public Holiday. The short week meant sales were held on Wednesday and Thursday.

“Despite there only being two days available, the national offering was again of a reasonable size.

“Nationally there was 48,752 bales on offer, 5,164 more than the previous sale,” AWEX said.

AWEX said the large offering received strong widespread competition from the opening lot, although brokers passed in 10.8 percent of the 48,752-bale offering.

“The strongest interest again was seen on the higher yielding, lower vegetable matter (vm) lines and those possessing favourable additional measurement results.

“The higher prices achieved on these lines of wool was a driving factor in the overall positive movements in most Individual Micron Price Guides (MPGs),” AWEX said.

“Across the country the MPGs for Merino fleece rose by between 1 and 30 cents, with only a few MPGs in the south not enjoying the rises.

“The skirtings generally recorded small increases, the exception some high vm lots which were irregular,” AWEX said.

“The crossbred sector also recorded overall gains, with the 26 micron MPG recording the largest gain for the week, the 38 cent rise in this indicator was an increase of nearly 6pc.

“The oddment market was the only sector to record an overall loss for the week,” AWEX said.

AWEX said the end result of these market movements was a 10-cent increase in the AWEX Eastern Market Indicator to 1377 cents/kg clean.

Buyers support market despite shipment issues – AWI

Australian Wool Innovation trade consultant Scott Carmody said it was a positive week at the Australian wool auctions when looking locally, with most types and descriptions on offer fetching better prices relative to those available prior to the one-week recess.

“A somewhat tentative start to auctions was pushed aside briskly as buyers evaluated each other’s purchasing intent as being strong, so general participation ensued.

“The robust signals were emanating from the biggest traders looking to cover off their risk and lessen exposure to sales made over the recess,” he said.

Mr Carmody said although the EMI closed 10 cents higher at A1377 cents/kg, in US dollar terms it weakened by US42 cents to close the week at US977c/kg.

He said the US dollar price levels for wool have dropped by more than 4pc when compared to two weeks ago.

“The Australian dollar has depreciated notably (4.7pc) against the US$ as global equities push higher, the USA raises rates to counter inflation and the markets move in favour of the US dollar as it benefits from the ongoing deterioration in risk appetite.

“The Australian dollar held up much better against all other major currencies,” he said.

The Western Market Indicator (WMI) added 13 cents to be 1430c/kg clean by the close of selling.

Mr Carmody said the national clearance rate of 89.2pc was high when compared to the previous six weeks of declining prices.

“Our major customer being China (80pc-plus of our wool exports) is facing major hurdles presently, both manufacturing and its population.

“Rolling shutdowns of factories and the particularly strict lockdowns in attempts to tame the COVID spread are impacting heavily upon people’s lives and the “normality” of businesses,” he said.

“Just two years ago, the shipment of wool was a three-week process.

“It now is a minimum of eight weeks just to get the cargo through the receival ports in China.”

However, Mr Carmody said through all these challenges, China remained supportive and a strong buyer of Australian wool, although the past few weeks have seen a resurgent European and Indian presence underpinning the wool markets.

“The prices for the better specified (better strength, style and lower vm) sale lots have moved noticeably ahead of the pack and are commanding most of the buyer’s attention.

“Increasing discounts are being applied to poorly prepared clips with the colour and cotted visually appraised lots being most affected.”

Mr Carmody said global traders were dominant on the purchasing lists, but a lift in buying activity from the big three top makers — two Chinese and one European — was witnessed towards the close of the selling week.

Sales revert to the normal selling day pattern for next week. The national offering falls, 41,293 bales are currently expected to be offered, only two selling days are required (Tuesday/Wednesday) to accommodate the quantity.

Sources: AWI, AWEX.

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