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Wool market waits on end to China COVID lockdowns

Sheep Central, June 3, 2022

AUSTRALIA’S wool auction market dipped for the second consecutive week this week, while the sector awaits an easing in logistics issues as COVID lockdowns in China are lifted.

The Australian Wool Exchange said the market heads into the final month of the 2021/22 wool selling season after a second week of overall losses, although there were selected pockets of price rises.

“There was also a noticeable increase in buyer sentiment toward the end of the series.”

AWEX said the national offering fell by 10,545 bales to 34,514 bales and brokers passed in 13.1 percent.

“With only four selling weeks left for the season, the total amount offered continues to track well above the previous season.

“Year-to-date there have been 1,719,102 bales put through the auction system, 130,644 more than the corresponding sale of the previous season, an increase of 8.2pc,” AWEX said.

“Across the county the individual Micron Price Guides (MPGs) ranged between +24 and -50 cents.

“Interestingly both of these movements occurred in Melbourne in the 17.0 and 16.5 micron MPGs respectively.”

AWEX said these price movements, combined with losses in all other sectors of the market, had the net effect of a 6-cent fall in the AWEX Eastern Market Indicator to 1414c/kg clean.

“In a similar pattern to the previous week, after     a further strengthening of the Australian dollar (the A$ climbed by 0.63 cents since last week) when viewed in US dollar terms the market recorded an overall increase.

“The EMI added US5 cents for the series, closing at US1013c/kg clean,” AWEX said.

“After being the strongest performing sector in the previous series, lack of buyer support resulted in the oddments suffering the largest falls this week.

“General losses in locks, stains and crutchings of between 45 and 60 cents pushed the three Merino Carding (MC) indicators down by an average of just over 50 cents.”

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Top makers dominate, with little fresh China business – AWI

Australian Wool innovation trade consultant Scott Carmody said purchasing was again dominated by orders direct from the top makers or their indent suppliers and other first stage manufacturers.

“Traders continue to report they are struggling to obtain fresh business of any consequence from China.

“With the lockdowns being lifted across that country, many are expecting a renewed interest once transport systems get flowing properly again,” he said.

“Indian and European buying remains evident in the sale rooms, but rates of purchase are somewhat more selective as a large portion of the offering is not meeting the quality and specifications required.”

 

Mr Carmody said the Western Market Indicator (WMI) dropped back by 14 cents or 0.9pc to close at 1490c/kg clean. The national clearance rate was once more greatly influenced by high passed-in rates in the crossbred wool sectors, he said.

“The forex rate of the Australian dollar against the US dollar will continue to influence the wool markets as the global economy adjusts to inflation.

“The A$ is set to profit from surging raw material prices as commodities traditionally do well in inflationary times,” he said.

“The Reserve Bank of Australia is expected to continually raise interest rates and China is easing financial support of Chinese companies, advantaging a stronger Australian dollar.

“Going against an improving A$ is the interest rate advantage of the US$ over the A$ and that Australia has aligned more closely with USA,” Mr Carmody said.

Next week the national offering decreases, due to sales in Melbourne and Sydney, but not Fremantle. Currently there are expected to be 33,095 bales on offer.

Click here to see the latest AWEX Micron Price Guides.

Sources – AWEX, AWI.

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