AUSTRALIAN wool prices rebounded this week after China moved to relax some of its COVID zero policies.
This week, China’s national health commission ended testing and health code requirements for people entering Beijing. allowed people mild or no COVID-19 symptoms to quarantine at home and instructed officials to halt temporary lockdowns.
The Australian Wool Exchange said the market performed strongly all week, driven by widespread competition across most sectors and all microns.
With only two sales left for the 2022 calendar year, the national offered quantity rose to 40,616 bales, 3269 more than last week, and brokers passed in 7.7 percent.
“It was the largest sale, and the first three-day sale, in four months,” AWEX said.
“It was initially a cautious start on Tuesday at the east coast markets, but as the day progressed prices continued to climb, accelerating further at a late selling Fremantle market.
“Values in the Western Australian market closed higher than the eastern auctions which later proved to be a significant barometer to the direction of the market in the coming days,” AWEX said.
“The AWEX Eastern Market Indicator (AWEX-EMI) added 12 cents for the day.
“The strong buyer sentiment and firming pattern continued into the following day resulting in MPG increases ranging from 18 to 85 cents and pushing the AWEX-EMI to a 32-cent increase, its largest daily rise in 14 months,” AWEX said.
“Thursday continued the theme at a Melbourne-only rostering.
“A New Zealand catalogue reduced the availability of Australian wool, assisting with additional price increases of 5 to 54 cents.”
AWEX said the EMI finished the week 54 cents higher at 1278 cents/kg clean, its largest weekly rise in 18 months.
“The market passed the billion-dollar turnover milestone in this series, taking one week longer than in the previous season.”
This week’s market turnover of $53.59m pushed the season-to-date figure to $1.018m, $35,000 lower than at the same time last year.
Chinese factories put bids into market – AWI
Australiana Wool Innovation trade consultant Scott Carmody said after many months of selling under uncertain demand and weakening price levels, the COVID zero policy changes in China had immediate effect.
“This saw many Chinese first stage factories push bids into the traders for consideration a full US30 cents or 4.5pc better than the previous week.
“This made selling of local buyer stocks much easier but as enquiry continued at volumes well above those local stocks, exporters were then faced with the conundrum of forward selling with market risk exposure,” he said.
“This policy decision by the Chinese central government was the first step needed to recover that nation to the dominant demand destination and price setter in the Australian market.
“For many months, other wool using countries have been helping the larger four or five Chinese users lead the spot price making and taking a higher than normal percentage of wools on offer into their inventory,” he said.
“Away from some good Italian orders for the best 15 to 19 micron wools, and some low spec and quality types, this week was dominated by the Chinese purchasing activity.
“To give impetus to this week’s good gains, it remains to be seen if the consumers of China deem it time and safe enough to hit the retail shops and choose to spend,” Mr Carmody said.
“On top of this, another major unknown is whether or not there has actually been enough wool products made to sell within the China domestic market, as many of the Chinese mills were on-selling first stage manufactured product into Europe.
“As the Northern Hemisphere Winter is upon us, hopefully wool doesn’t miss its peak selling opportunity into the world’s second largest domestic economy.”
Merino fleece and skirting wools were the most well sought types and subsequently fetched returns upwards and over 100ac clean/kg better than were previously available. All Merino wool descriptions were keenly competed for, but it was notable that the 19.5 and 21.0 micron standard Chinese types came under the strongest demand pressure and most widespread competition from multiple exporters, Mr Carmody said.
“The gains were timely as next week sees the final sale of the calendar year prior to the annual three week recess.”
Next week will be the final sale before the annual three-week Christmas recess when 49,693 bales are expected to be offered in three centres; the largest sale for this season. Melbourne will again sell over three days to accommodate its large catalogue.
Click here to see the latest AWEX MIcron Price Guides.