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Subdued competition and less offshore demand drops wool prices

Sheep Central, September 2, 2022

SUBDUED demand from China’s major top makers dampened trader interest to lower prices at Australian auctions this week.

The Australian Wool Exchange said after two weeks of minimal price movements and an overall unchanged market, the wool market has recorded an overall fall this series.

“Despite the western region resuming sales after a week’s break, the national offering fell.

“There was a total of 35,538 bales on offer, 1893 fewer than the previous week,” AWEX said.

“Although this smaller offering attracted strong demand, from the opening lot it was apparent that the prices on offer were below last week’s levels.

“The market continued to slowly fall as the week progressed.”

AWEX said the largest drop in prices was seen in the south for Merino fleece types 19 microns and finer.

“This was reflected in the individual Micron Price Guides (MPGs) in the south, which for 19 and finer fell by between 40 and 76 cents.

“In the north, which was also a designated superfine sale, the losses were not as large, with some MPGs recording positive movements,” AWEX said.

The movements in these MPGs combined with small overall losses in the skirting, oddment and crossbred sectors resulted in the AWEX Eastern Market Indicator (EMI) dropping by 12 cents to 1330 cents/kg clean.

“Since the beginning of the new season (1st of July) the EMI has not yet recorded an overall weekly positive movement.

“The EMI opened the 2022/23 season at 1430 cents, and over the six sales held so far in the new season the EMI has dropped by a total of 100 cents, a fall of nearly 7 percent.

“When compared to the corresponding sale of the previous series the EMI is trading at a very similar level,” AWEX said.

“The EMI is currently 2 cents lower, a reduction of only 0.2pc.”

China’s largest three first stage processing top makers were relatively quiet

Subdued competition and lacklustre offshore demand were the key factors in the market this week, according to Australian Wool Innovation trade consultant Scott Carmody.

“Local traders backed off their intensity in purchasing and lowered risk, both in price and inventory as positive signals were not forthcoming from their overseas clients.

“It was left mainly to the indent operations from both Italy and China to absorb the majority of this week’s offering,” he said.

“Being a designated superfine sale in Sydney, there was a fair proportion of spinners and best top making types sub 19 micron for the European operators.

“Almost all of these lots were ultimately purchased by the Italian interests and in a majority of cases, the NM (non-mulesed) certified lots were highly sought and paid for, on top of the very healthy premium for the better processing quality of these types,” he said.

“The forex rate of the Euro v A$ went a full percentage point to their advantage as well.”

Mr Carmody said China’s largest three first stage processing top makers were relatively quiet in their buying this week when compared to the normal percentages of their market share.

“This was noted by traders as a negative signal and in turn influenced the buying strategy of the trading buyers this week.

“Subsequently, prices fell consistently throughout selling but these same traders remained the key operators for the week and trying to manage forward positions profitably, run indents and to a lesser extent, careful stock accumulation,” he said.

Quantities for next week are expected to rise. Currently, there is rostered to be 39,562 bales on offer in Fremantle, Melbourne and Sydney.

Sources: AWEX, AWI.

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