Wool prices drop as COVID lockdowns hits China demand

Sheep Central, November 4, 2022

WOOL growers passed in about a fifth of this week’s auction offerings as prices slumped under the influence of depressed global demand.

The Australian Wool Exchange said the market fell again this week, driven by weaker demand.

“The talk amongst the trade early in the week was of a cheaper market, the only question was how much it would fall.

“When the market opened in the East the prices on offer were noticeably lower, but not as low as some buyers predicted,” AWEX said.

Brokers passed in 19.7 percent of the 39,023 bales offered.

“Good style lots and wool possessing favourable additional measurement (AM) results continued to attract solid support and were least affected by the falling market.

“Lesser style wool, wool with poor additional measurement results and wool carrying higher levels of vegetable matter (more than 1.5 percent in particular) were not as well-supported and recorded larger falls,” AWEX said.

“By the end of the first selling day (Wednesday), the individual Micron Price Guides (MPGs) for Merino fleece had dropped by between 14 and 59 cents.

“These losses combined with overall falls in the skirting, crossbred and oddment sectors resulted in a 27 cents drop in the AWEX Eastern Market Indicator (EMI).”

On the second day of selling (Thursday), AWEX said the market continued to fall but at a slower rate than the previous day, due in part to strong resistance from sellers, many of whom were not prepared to accept the prices on offer.

“By the end of the day the passed in rate for Merino fleece nationally had climbed to 27pc.

“The movements in the Merino fleece MPGs ranged between unchanged and -44 cents.”

AWEX said the Eastern Market Indicator lost another 12 cents, closing the week at 1261 cents/kg, an overall fall of 39 cents, a reduction of 3pc.

A noteworthy event, albeit a negative one, was the 30 micron MPG in the south, which fell to 303 cents, a record low for this indicator, AWEX said.

COVID lockdowns hit wool customers – AWI

Australian Wool Innovation trade consultant Scott Carmody said this week’s Australian wool auction sales could not hold back the negative sentiment enveloping the global industry presently.

“Local markets are slowly deteriorating the good price gains that were made through October with another three percent of raw wool value on average being lost this past week.

“All wool types and descriptions were affected, but it was primarily the Merino long wools sector that bore the brunt,” he said.

“As prices lowered though, seller resistance became apparent.

“Almost 20pc of this week’s offering failed to meet the sellers’ reserve prices.”

Mr Carmody said the primary factor of the tough demand being experienced presently is the continuation of the lockdown regime of Australia’s largest customers in China.

“Domestic retail sales in China are dropping as people are reticent to leave home to shop.

“On top of that, the lack of availability of significant first stage processing anywhere else globally is stymying opportunistic buying to fill gaps or take advantage of the current prices – which are considered “cheap” by many trade commentators,” he said.

“Meanwhile large parts of south eastern Australia are facing severe climatic conditions with widespread flooding.

“Not much shearing is taking place in these regions nor are trucks able to access properties that have baled wool on farm ready for testing and selling.”

Mr Carmody said these major disruptions will affect the flow of wool onto the market pre and post the Christmas recess, with unpredictable supply becoming a concern to exporters and overseas manufacturers.

“There remains just six weeks of selling prior to the three-week recess for Christmas.”

Next week’s offering reduces, with currently 35,949 bales expected to on offer in Melbourne, Fremantle and Sydney which is a designated superfine sale.

Sources – AWEX, AWI.


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