AUSTRALIAN wool prices slumped under an over-supply of drought-affected fine and superfine wool this week.
AWEX senior market analyst Lionel Plunkett said after the healthy gains experienced at the previous sale, the upward trend of the Australian wool market was short-lived, as sharp corrections were felt across the board.
Wool growers passed in 19.4 percent of the 36,084-bale offering, 4012 more than last week, as the benchmark AWEX Eastern Market Indicator fell 53 cents to 1970c/kg clean.
“The EMI has now fallen four out the previous five weeks, losing a total of 124 cents over that period.
“The EMI is now 146 cents away from the record of 2116 cents it achieved in August of this year,” Mr Plunkett said.
The national year-to-date bale offering is 13.3pc down compared to the same time last season, Mr Plunkett said, but the value of wool this season exceeded $1 billion this week, the quickest this figure was reached since AWEX started compiling this information in 1995.
“This was one sale faster than the previous season, where the billion-dollar mark was achieved in Week 17, and five sales quicker than the 2016/17 season when it took 21 weeks to reach the same milestone.”
Mr Plunkett said prices generally fell by 50 to 120 cents this week, with wool 19 microns and finer suffering the largest falls, particularly lines with poor additional measurements, due to the over-supply of these types.
Mr Plunkett said currency movement could be contributed to some of the market movement, with the EMI in $US terms only losing 25 cents to US1405c/kg clean.
“Skirtings tracked a similar path to the fleece, general losses of 80 to 100 cents, with 18.5 micron and finer most-affected.
“The oddment sector suffered large losses in this sale,” he said.
Locks, stains and crutchings were generally reduced by 80 to 120 cents, pushing the three carding indicators down by an average of just over 100 cents. The crossbreds were the best performing sector, only losing 10 to 30 cents, Mr Plunkett said.
Australian Wool Innovation’s weekly market report said the buyer apprehension seen prior to last week returned to trend, with many influential buyers reverting to their month long cautious approach to buying, reflecting the sporadic nature of current overseas demand.
“The direct reversal and swiftness of change in market sentiment and pricing at first seemed surprising, but given the selection that greeted buyers, in hindsight it was somewhat inevitable that we would see a rather lacklustre tone enveloping the sale rooms.
“Much of the offerings’ quality was drought-influenced,” AWI said.
“The significant fining up of the average national micron (fibre diameter) is playing havoc on Asian manufacturers’ expectations.
“Many Chinese users are saying our current supply is “too fine”, citing that demand remains strongest and prices influenced predominantly around the 19.5 and 21 micron type segments,” AWI said.
“To highlight what a difference the supply chain, from grower to end user, is seeing from season to season, this week the Sydney market in the Merino fleece room offered an average of 17.6 micron compared to 18.5 micron offered at the same sale last year, whilst Melbourne offered 19.2 micron compared to 20.1 micron last season and Fremantle 19.2 micron this year as opposed to the 19.5 micron of last season.
“In addition, the AWTA key test data revealed that for the first quarter of the season, that despite the 11.4pc overall fall in total volume of Australian wool tested, there was 70.6pc more wool tested that was finer than 16.5 micron, 18.6pc more wool tested between 16.6 and 17.5 micron and 9.1pc more wool tested in the 17.6 to 18.5 micron range.”
AWI said this was not to say that demand is not strong in the superfine Merino (less than 18.5 micron) area.
“European interest remains as strong as ever and even in the general declining market, premium pricing by the Italians in particular, is clearly evidenced.
“Small pockets of Indian buying for better specified batches is also apparent, but when sale lots fall outside the required standards of Europe and India, the price falls “off the cliff”, making up a significant percentage of the lower micron price guides,’ AWI said.
“In some of the 15 to 17 micron range for example there is up to 800-cent difference between sale lots in the top and bottom of the quality range.”
AWI said the prompt demand for wool from China was almost exclusively placed in the hands of the indent buying companies, so trader exporters were left largely with just the scraps to compete for.
“With nearly all orders needing completion in the domain of just two or three companies, it debilitated the capacity of other sale room operators to compete.
“The largest top maker from China continues to be very active and could be seen as perhaps a positive indicator to better market conditions reappearing.”
AWI said the biggest falls were seen on the carding markets of up to 7.5pc.
“This readjustment in levels was expected as prices have been considered far too close to other higher value wool types for months.
“The lowering levels should help attract fresh business opportunities.”
Next week just under 39,000 bales are scheduled for sale. Click here to see the latest AWEX Micron Price Guides.
Sources: AWEX, AWI.