AUSTRALIA’S wool auction market has continued to retract this week despite a drop in supply, falling for the fourth consecutive selling series.
The Australian Wool Exchange said the national offering was 31,147 bales this week, 12,550 bales fewer than the second week of the previous auction season.
“Buyer activity would be best described as cautious from the outset.
“Wool possessing favourable additional measurement (AM) results continued to be well supported and were least affected by the falling market,” AWEX said.
“Lots containing less favourable AM results and lower yielding types did not receive the same level of buyer support and generally recorded the largest falls.”
Brokers passed in 13.6 percent of the bales offered.
AWEX said the individual Micron Price Guides (MPGs) for Merino fleece fell by between 6 and 50 cents.
“The benchmark AWEX Eastern Market Indicator (EMI) fell by 18 cents for the series, closing at 1107 cents/kg clean.
“The EMI has now fallen for the last eight consecutive selling days, losing 63 cents across this downward run,” AWEX said.
“The EMI is now at its lowest point since the 13th of October 2020 when the EMI was 1066 cents/kg.
“The EMI opened the calendar year at 1213 cents/kg and has lost 106 cents year to date, a drop of 8.7pc.”
AWEX said as the finer microns have been falling at a greater rate than their broader cousins over recent weeks and months, the differential between microns has been slowly retracting.
“This is best highlighted by viewing the 17 micron and 21 micron MPGs in the south.
“The current difference between these two MPGs is 336 cents,” AWEX said.
“This time last year the MPGs were 1897 and 1381 cents respectively, a difference of 516 cents.”
AWEX said Fremantle originally had a sale gazetted for next week, but due to lack of shearing in July it was decided that there was not enough quantity to support this sale.
“Despite there being no Fremantle sale, the national offering is only expected to fall slightly,” AWEX said.
Currently, there is 30,518 bales on offer, with only Sydney and Melbourne in operation.
Less global spending and higher freight rates – AWI
Australian Wool Innovation trade consultant Scott Carmody said the strengthening Australian dollar against the US dollar (USD) and Chinese yuan (CNY) was responsible for around two thirds of this week’s wool price drops, but the necessary change to the languid demand scenario has not been forthcoming.
“Some fresh business is almost always about, but the “keen” price bids available have largely been a gamble for exporters for the past month or so, since the encouraging price gains of late May into early June,” he said.
“Merino descriptions felt the brunt of the less than enthusiastic buyer participation, in particular, the superfine (less than 18.5 micron) types usually destined for luxury garment manufacturing.
“The global market is still adjusting to the lower discretionary spend on clothing as consumers cope with inflationary pressures, but the supply chain is also adapting to the growth in the Australian production of these exclusive wools, which now make up over 35pc of the national clip,” Mr Carmody said.
“Two of the top three Chinese top makers slowed their purchases down this week, but stayed in touch.
“The largest Australian-based trader was the most obvious omission from near the top of the Merino fleece buyers list, but the next in line trader showed some strong buying intention, filling that gap admirably,” he said.
“Perhaps the most notable positive from the week was the buying of two European-based processors, that took a large percentage of the better 18 to 20micron wools of lower VM levels.”
Mr Carmody said as far as logistics are concerned, almost all major container lines remain in total avoidance of the Suez route due to the danger and soaring insurance premiums.
“Freight rates and associated costs have soared by having to sail the extra week around Africa.
“This places extraordinary demand upon vessels and containers globally as both the ship and container are out on the water, and out of play, longer,” he said.
“Initially, unused capacity was scarce.
“Since then, the industry’s ability or appetite to add further infrastructure has been limited at best,” Mr Carmody said.
“All this has meant soaring rates for container shippers, by which greasy wool and wool tops, yarn, fabric and garments are all affected.
“The average worldwide cost of shipping a 40-foot container hit about A$6,240 during June, which is more than triple the cost a year prior and the highest rates since the COVID-impacted freight rates of September 2022.”
Click here to see the latest AWEX Micron Price Guides.
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