Wool prices surge as buyers in short supply chain act on tight supplies

Sheep Central, April 8, 2016

AWEX logo1WOOL prices surged this week as buyers paid more than $64.3 million to secure supplies as the 85th International Wool Textile Organisation Congress was held in Sydney.

AWEX Market Information said buyers paid $21 million for the 14,810 bales offered in Sydney, $26.6 million for the 19,768 bales bought in Melbourne and $16.6 million for 11,541 bales in Fremantle.

AWEX senior market analyst Lionel Plunkett said close to 500 IWTO delegates were treated to a feature auction in Sydney this week which was transferred from the usual site at Yennora.

The AWEX Eastern Market Indicator lifted 31 cents to 1270c/kg clean, with the EMI in $US terms lifting 24 cents to US968c/kg as the Australian dollar appreciated slightly to US76.25 cents.

Brokers passed in 5.6 percent of the 48,878 bales offered.

“Despite the weakness late in the sale the AWEX-EMI finished 31 cents higher for the sale, the largest rise in almost six months,” Mr Plunkett said.

Good results in the fortnight prior to the Easter recess provided a strong platform going into the sale which contributed to a surging market, he said.

“There were expectations of a healthy market amongst sections of the trade.

“However, the size of the gains caught many by surprise.”

Increases of 60 cents were common by the end of the second day before the rally lost momentum and prices eased back 10 cents at the close of the week, he said.

“During the sale buyers displayed a strong appetite for the 19-micron and broader range, especially the limited quantity around 22 and 23 microns.

“This support spilled over into the finer crossbreds (25/26 microns) which were as much as 70 cents higher.”

Mr Plunkett said the broader crossbreds were less extreme and even finished the series slightly lower for some microns.

The Merino skirtings sector lagged behind their fleece counterparts, but they still managed to close ahead, though the increases were restricted to less than 20 cents, he said.

“Merino cardings had an unremarkable auction, closing slightly lower for the week.”

Tight supply and supply chain length are key factors

Fox and Lillie Rural brokerage manager Eamon Timms said the market was helped by the tightness of supplies and of the shortness of the supply chain to the semi-processed or tops stage, but the market topped out at Wednesday and on Thursday prices eased.

“The supply chain is probably the shortest it has ever been.”

There is so little greasy wool in the supply chain that buyers need to return to the market to buy stocks, he said.

“The other thing is that there is not heaps of business out there, but certainly there is an imperative to drive machinery and that’s why they are waiting until the last minute – delaying decision-making as much as they can.”

Techwool Trading export trade manager Josh Lamb said the market is supply-driven, but there also has been a lift in Merino tops demand in China over the last four weeks which has driven recent market rises.

“The overall tone of the market, as it has for most of the season is supply-driven, there is no doubt about that.

“The market is particularly positive for Merino fleece with a lot of mills talking up sale of worsted suiting fabric to America — which is very, very strong — the price is not too spectacular, but the demand is there,” he said.

“That is something we haven’t heard for a few years — most of the fabric side of things has been driven by Chinese domestic demand, that’s encouraging for wool growers.”

Auction quantities are expected to hover around 40,000 bales over the next month before drifting lower closer toward the end of the season.

Click here for the latest AWEX Micron Price Guides.

Sources: AWEX Market Information, Fox and Lillie Rural, Techwool Trading.


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