POOR demand and subdued trader support dropped Australian wool prices further at auctions this week, despite the offering slipping under 30,000 bales.
The Australian Wool Exchange said the market is limping toward the end of the 2022/23 season, recording another overall loss and the seventh straight week without an increase.
AWEX said Fremantle did not hold a sale again this auction series, pushing the national quantity down to just 28,484 bales, the smallest sale since September.
Brokers passed in 14.8 percent of the bales offered and the losses to the benchmark AWEX Eastern Market Indicator this week pushed it down to 1139 cents/kg clean.
“The EMI is now at its lowest point since the beginning of December 2020, when the EMI was at 1133 cents,” AWEX said.
“Currency played virtually no part in this week’s falls.
“The EMI lost 3pc when viewed in both Australian and US currencies,” AWEX reported.
“In a similar patter to the previous series, buyer sentiment was weak from the outset, which translated into price reductions across all merino fleece types.
“On the first day the market opened lower and then progressively deteriorated,” AWEX said.
“By day’s end, the individual Micron Price Guides (MPGs) for Merino fleece had dropped by between 4 and 86 cents.
“The AWEX Eastern Market Indicator fell by 25 cents, with only a generally unchanged crossbred market and limited movements in the skirtings and oddments preventing a larger fall.”
AWEX said the losses continued into the second day, but at a more subdued rate than on the first, with some micron pockets recording no change or small increases.
“The movements in the Merino fleece MPGs ranged between plus 10 and minus 55 cents for the day.
“The skirtings tracked a similar path to the fleece, while the oddments and crossbreds recorded little change,” AWEX said.
The net result was a 10-cent drop in the EMI and the EMI finished the week 35 cents lower for the week.
Fremantle returns next week for the final sale of the 2022/23 season, pushing the quantity higher. Currently, there are expected to be 49,496 bales on offer, and if this quantity eventuates, this will be the largest offering since April, AWEX said.
Demand hampered by fragile global economy – AWI
Australian Wool Innovation trade consultant Scott Carmody said the leading demand indicator of the USD EMI finally succumbed to the slack demand at present and shed around 3.5pc after holding on resolutely to the established value the past month.
“That resilience in the US prices has been largely propped up by the value of the AUD rising against that US dollar, that a majority of wool is traded upon,” he said.
“There is anecdotal evidence at the latest CWIA (China Wool Industrial Association) conference of a rising interest from China in using the RMB (Chinese renminbi-Chinese Yuan) for the L/C (letter of credit) wool contract transaction or to a lesser extent the AUD.
“This is being promoted across China wool importers to lessen the risk exposure of using forex cross rates from RMB into USD into the AUD,” he said.
“If this comes into effect, a steadier price could eventuate, even just for the inter and intra day auction price-setting basis.”
Mr Carmody said the “normal” demand cycle for wool manufacturing has been hampered by the fragile global economy, led by the headline act of inflation and subsequent raising of interest rates.
“The mini wool price recovery influenced by China buying from January through to March was based around the exit of China from lockdown policy, but China businesses have quickly re-assessed that “honeymoon” period of consumer spending.
“China still relies heavily on exports of all sectors of manufactured wool product and these export markets have disappointed having already spent 2 years out of lockdown policy,” he said.
“China top makers were the most active of buyers this week. Interesting to note that as the prices lowered, those manufacturers targeted the better quality wools.
“Trader support could only be described as subdued.”
Click here for the latest AWEX Micron Price Guides.
Sources – AWEX, AWI.