News

Wool prices fall again as buyers react to bale offering projections before recess

Sheep Central, June 19, 2015
  • wool bales dec15-14AUSTRALIAN wool prices suffered their biggest weekly fall in two years this week, as buyers reacted to recent and projected bale offerings before the coming sale recess.
  • AWEX senior market analyst Lionel Plunkett said the AWEX-EMI fell 36 cents to 1320c/kg clean, on the back of a 17-cent correction the previous week.
  • The EMI in US dollar terms fell 34 cents to 1019c/kg as the $A-US exchange rate fell 0.43 cents to US77.23 cents. Brokers passed in 7 percent of the offering this week.

    Future offering estimates eases buying pressure

    Although just 23,622 bales were offered this week in Sydney and Melbourne — the smallest national total for the year — next week more than 48,849 bales are expected at all three selling centres, 38pc above the previous forward forecast for the last sale of the 2014-15 season.

    In Australian Wool Innovation’s weekly market review, AWI trade consultant Scott Carmody said in just a week, volume estimates have increased the equivalent of a standard Sydney week sale, taking all the pressure off urgency in all buyers’ monthly purchasing strategies.

    “What is also playing on buyers’ minds is that the following two sales (before the three-week recess) are also showing higher bale figures than stated just a week ago.

    “With the three-week recess approaching, buyers do not like to carry stock through these breaks in sales due to holding and finance costs as well as the market risk,” he said.

    “Every year, this becomes a particularly sensitive period with regards to volume of wool coming in the market.”

    Merino rates drop 50-60 cents

    Mr Plunkett said the Merino fleece sector was the main area that weighed down the EMI, with falls of 50-60 cents clean over the week.

    “The price reductions were more heavily weighted towards the medium and broader types, but were reasonably consistent across both sale days.

    “The finer microns suffered sharp losses for the lower spec types, however the more stylish, 40Newtons/kilotex types found good support and any discounting for these types was limited,” he said.

    Mr Plunkett said the 22-23 micron range also showed positive signs in Melbourne on the final day.

    “Whilst volumes were limited, prices remained in line with the previous day.”

    Merino skirtings followed the fleece lower during the sale although the movements were not as large, closing 20-40 cents down for the week, he said.

    Crossbred types also close in the red

    Crossbred types remained relatively calm when compared with the tumble in fleece catalogue valuations.

    “Most microns closed in the red, but the movements were quite modest,” Mr Plunkett said.

    Some lines around 30 microns fell around 10-15c/kg clean.

    He said the Merino Carding Indicator (MCI) fell in both regions, its first weekly fall since early March.

    “In Melbourne, over that period the MCI had risen for 14 consecutive selling weeks, a record for the MCI.”

    AWEX-EMI still almost 300 cents above 2014 level

    Mr Carmody said although the bull run of Australian wool auctions appears over for the time being, the AWEX-EMI is still almost 300c/kg clean kg better than at the same time last year.

    A rare positive result in the market this week came for the best spinners/best topmaking style, high strength wools which remained well-sought after, he said. These wools managed to put on a solid 15-20c/kg clean gain, due to stronger Italian orders in the auction competing with some forward sales being executed and one Chinese mill looking to source the better quality.

    Mr Carmody said the market reacted to a slight easing of buying intent of the Chinese indent orders and it took to the end of the sale week before any signs of general buyer activity became apparent.

    “The lack of any serious overseas enquiry for a two-week period had seen local buyers and forward selling exporters on the sidelines, but towards the very end of the selling week, most of these operators cautiously started to become involved again as buying interest stemming from China and India was reported.

    “The larger volume has eased the buying pressure for exporters, but hopefully all will be attracted back to the market by the lower price levels,” he said.

    “It is thought though that a significant renewal of forward and indent buying will be needed to arrest and reverse the current downward trend.”

    Sources: AWEX, AWI.

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