WOOL prices lifted sharply in eastern states auction rooms this week, although values softened on the last day of selling in Western Australia after a fall in the Australian-US dollar exchange rate.
Australian Wool Exchange senior market analyst Lionel Plunkett said the sharp upward movements in sales on Wednesday and Thursday came on the back of robust widespread demand.
“Many exporters reported very strong overseas interest, with many orders being booked at price levels above last week’s close.
“This interest strongly buoyed buyer confidence, which in turn lifted sentiment in the sale room,” he said.
Mr Plunkett said from the opening lot on the first day in the east, it was immediately apparent that large price increases were on the cards.
“The market opened higher and continually rose as the day progressed, so much so that Fremantle selling last, generally closed at price levels higher than the eastern centres.
“By the end of the day the individual Micron Price Guides (MPGs) across the country had risen by between 76 and 144 cents,” he said.
“As Sydney and Fremantle did not sell on the final day last week, a day in which Melbourne recorded gains of between 12 and 72 cents, the largest increases were recorded in these two centres.
“These rises combined with gains in all other sectors, pushed the AWEX Eastern Market Indicator (EMI) up by 72 cents, a 6 percent rise,” he said.
“This was the largest daily rise in the EMI since early November.”
On the second day of sale in Melbourne and Sydney, the market generally continued to rise, but at a much more subdued rate,” Mr Plunkett said.
“The MPGs in Sydney and Melbourne recorded movements of -2 to +15 cents.
“Again, gains in the other sectors helped to push the EMI up by another 17 cents.”
Mr Plunkett said the EMI gained 89 cents for the auction series, closing at 1291c/kg clean. Brokers passed in 5.8pc of the 39,841 bales offered.
“However, the market could not sustain its upward path all the way to the end of the series.
“In Fremantle (selling last) there was a noticeable softening in buyer sentiment, pushing prices continually lower,” he said.
“The MPGs in the west dropped between 29 and 82 cents for the day, with 20 micron and coarser most affected.”
Demand coming from new Chinese knitwear business
Fox and Lillie brokerage manager Eamon Timms said the Fremantle sale on Thursday started after the eastern auctions had closed due to the time difference. He said the significant adjustment in the 20-21 micron prices (71-82 cents down) in the west on Thursday followed the Melbourne and Sydney markets losing steam in late sales on Wednesday, and was compounded by the market being perhaps “overshot to the upside” on medium Merino wools and buyers reacting to the uncertainty around the drop in the Australian dollar. The $A-US exchange fell US1.42 to US76.31 this week.
“It is one of those things with markets, uncertainty brings a lack of confidence.”
He said the general market lift was due to new Chinese business, with the European market still very slow, although Indian processors are more active than before Christmas, but coming off a very low base. Mr Timms said there were some indications the superfine Merino wool going into China was being blended with cashmere.
The current fine wool demand was coming from knitwear business and there was less availability of fine wool due to the seasonal coarsening of the clip, he said.
“There is just tremendous demand from the knitwear sector in China.”
Mr Timms said crossbred wool prices also lifted this week due to Chinese demand, possibly with some processors keeping machinery going with a less expensive product, especially the 30 micron and finer types.
“We’ve seen the first real change in values for the medium 21-22 micron (Merino) wools … so it is not out of order that you would see some spill over into those finer than 30 micron wools.”
Australian Wool Innovation trade consultant Scott Carmody said the week’s hive of activity in sale rooms came about due to traders and their Chinese counterparts.
“Healthy bids were being received pre-sale above ruling market rates and this quickly converted to instant and swift market rises.
“As sales proceeded on Wednesday, this call for new business followed the market up injecting further impetus onto the gains.”
A smaller volume of 40,000 bales helped the market’s fortune this week, but demand from new forward and relatively prompt shipment orders were key, Mr Carmody said.
Although he said it was not all positive for the week, as the definite pull back started in the eastern selling centres towards the conclusion of auctions on Wednesday was quickly exacerbated by the Western Australian.
“At the close of the selling week prices across most sectors had fallen between 30 and 80 cents in WA, with the 21 micron types most affected.”
About 47,000 bales are rostered for next week over two days, Tuesday and Wednesday.