Wool Market Reports

Wool prices lift, but demand increase yet to appear

Terry Sim January 15, 2025

 

AUSTRALIA’S auction wool market has started2025 with an exchange rate-driven increase in prices for fleece and oddments, but it’s not indicative of the substantive demand recovery the industry is looking for.

On Tuesday, The Australian Wool Exchange said the southern wool market launched itself into the New Year with strong confidence.

“Positive gains for all microns and descriptions have seen today’s (Tuesday’s) southern market Indicator moving up by 37 cents.

“The more favoured, well-measured and higher yielding wools attracted increases of 50 to 60 cents,” AWEX said.

“Other types increased by 40 to 50 cents and the high VM and tender wool increased by 30 to 40 cents.”

AWEX said Merino skirtings prices increased across all microns and descriptions by 30 to 50 cents. There was selective buying from the larger quantities of crossbred wool with price increases of 20 to 30 cents for well-prepared wool and 10-cent increases for less well-prepared wool. Merino locks prices were the standout with increases of 30-40 cents, but Merino lambs, crutchings and stains all remained generally unchanged.

Recovery in Chinese domestic consumption needed

Australian Council of Wool Exporters and Processors president Josh Lamb said the price lifts this week were largely exchange rate-driven after a 4 percent drop in the value of the Australian dollar against the US currency.

There is no real move in sentiment around the Merino fleece market apart from what’s happened with the exchange rate over the (holiday) recess.”

There has been a little bit of movement in the shorter carbonising and pieces types; there seems to be a little bit better interest there, but the fleece is mainly driven by currency.”

Mr Lamb said the biggest thing for growers to realise is that wool is sold in US dollars.

“So when you get a four percent drop in the currency — usually we can’t parlay that into the market in Aussie dollars — but this time around it has worked and that’s why we’ve got an increase in Aussie prices.

“The customers are still buying at the same US (dollar) level that they before Christmas.”

Mr Lamb said for there to be a substantive increase in wool demand there would need to be consumption recovery in the Chinese economy.

“Their export economy seems to be growing a little bit, but their domestic consumption is just flatlining at the moment; we need that to improve, that’s the biggest thing.

“And outside of China we need something to change with these wars going on around the world and for a bit less uncertainty around what will happen when Trump takes power,” he said.

“We still need a circuitbreaker for the market to  actually break out from what it has been for the past 18 months to two years.

“We haven’t seen that yet,” Mr Lamb said.

“Yesterday is great, it’s a good start, but we need something more substantial than that for the market to hold a new level.”

Mr Lamb said the indications are that the price lift is too late to change the decisions of those growers moving out of wool sheep. He agreed there needed to be a more substantive market change to influence grower intentions to maintain or increase apparel wool production.

“We need a much higher market sustained for a longer period of time – we need two to three years.

Maintain flocks for the demand-driven price rise

Fox and Lillie brokerage manager Eamon Timms said after it was announced late last year that US interest rates were not expected to drop, this “pushed their currency up and our currency down” in the 24 hours after the last 2024 wool auction.

“That spurred a great deal of enquiry out of China; it was one of the busiest 24-48 hours of inquiry from China for many months and exporters were able to get some good sales on the books.

“Exporters were able to see at a premium to the (auction) closing price, which doesn’t happen very often,” he said.

“It’s extremely rare that that occurs.”

Mr Timms said the current low supply situation also helped the market situation also worked in sellers’ favour.

However, Mr Timms agreed that the recent price rise was not the “big up that we know is coming” with a significant demand change backed by improved global economic conditions.

“We know there is a big move coming, we just don’t know when, but this is not part of the big move.

“The fundamentals underpinning demand flowing through at the consumer end … they have not moved.”

Mr Timms said the industry is facing the lowest supply of Merino it has probably ever seen next season and he urged growers to maintain their Merino flocks.

“The people that maintain their Merino flocks will certainly benefit from a big increase in price that’s coming, but it’s probably not in the next couple of months.

“But very large players in the supply chain are fully expecting that there will be a large change in the price of wool to the upside.”

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