WOOL forward trading continued last week, albeit within a wide range, while volatility continued in the Australian spot auction market.
This week, the AWEX Eastern Market Indicator rose 100 cents on the first sale day, instead of going down 100 cents.
The only trouble this week is that it could hold the gains for no more than 24 hours. The fuel to the already raging fire was the concern along the pipeline of the announcement of the boycott on seven key Australian exports to China. Although wool was not on the list, doubt is put into the minds of exporters and end users alike. This led to a rush to secure quantity followed by a change of sentiment.
Add to the mix a chaotic and ever-changing election outcome in the United States, and the rising global COVID-19 numbers and lockdowns across Europe, and it all makes plotting the market direction a fool’s errand.
On a positive note, 19 micron index on the forward market traded at 1370 cents in November, in December at 1400 cents and in January at 1415 cents, against a closing spot cash level of 1380 cents. The 21 micron index traded up to 1260 cents and in January to 1255 cents on Wednesday’s rally. The AWEX 21 micron Micron Price Guide closed the week at 1208 cents.
Those trades highlight the value of having orders in the market that can take advantage of the rallies as buyers continue to look price certainty over some of their commitments in this sawtooth market. Activity on the buy side continues somewhat muted as constant volatility heightens counterparty concerns.
The medium-term direct remains the same. The drivers are the macro-economic and health outlook, which remain bearish, combined with the ongoing uncertainty of Chinese exports will see the rollercoaster ride continue. China took 89.2pc of Australia’s wool at auction in September.
Rallies should still be viewed as opportunities to obtain some base level cover. Goal setting should be implemented ahead of time, especially in the current uncertain times.
Indicative trading levels
19 micron 21 micron
Nov/Dec 1300 cents 1170 cents
Jan/Feb 1270 cents 1150 cents
Mar/Apr 1300 cents 1120 cents
May/June 1300 cents 1100 cents
This week’s trades
November 19 micron 1370 cents 5 tonnes
December 19 micron 1400 cents 5 tonnes
December 21 micron 1190/1260 cents 24 tonnes
January 18 micron 1600 cents 4 tonnes
January 19 micron 1400/1415 cents 13 tonnes
January 21 micron 1255 cents 5 tonnes
TOTAL 56 tonnes