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Wool prices surge as Chinese processors move to buy forward

by Sheep Central, 18 August 2017

AUSTRALIA’S wool price benchmark has broken through 1600c/kg clean for the first time as Chinese buyers switch from “hand-to-mouth” to forward buying.

Australian Wool Innovation’s weekly market report said the AWEX Eastern Market Indicator) forged into record territory this week, with consecutive days of breaking the highest levels ever seen.

“By the week’s close the EMI settled at 1614c/kg clean which is 316 cents or almost 25 percent higher than at the same period of last season.

“The week produced a gain of 64c/kg clean or a 4.1pc addition to local wool values within just seven days,” AWI said.

In US$ terms, the EMI finished 5pc higher at US1281c/kg clean or an increase of US61 cents, which represents a 28pc or US280c/kg clean advance in 12 months.

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China moves from hand-to-mouth to forward buying

AWI said all wool types and descriptions, apart from cardings, rose by margins ranging from around 4pc for the higher-priced wools to a staggering 17pc on the broadest wools of the long suffering crossbred sector.

“The charge came solely from China, with a few of the larger users looking to fill their wool production pipelines.

“Following some very large forward orders being required by some larger Chinese mills, all exporters were ready to pay more from the outset,” AWI said.

“The extent and swiftness of the price gains caught the majority by surprise.”

AWI said several mills were looking to get set at the end of last week and pre-auction this week for delivery two to three months out.

“This represented to local exporters and buyers a major shift in operational methods from “hand to mouth” to forward buying.

“For the past few years, the larger Chinese users have been reticent to book too much into the future, and no doubt this may well prove to be astute and an opportune change of direction as the $US v $A looks to be also strengthening against expectations of just a month or two earlier.”

Prices consistent across all auction centres

AWI said the Merino fleece and skirting segments of the market sold consistently dearer across all three centres.

“All wools traded in the 60 to 90 cents dearer range and generally shadowed moves of each micron and type category.”

AWI said quotations and micron price guides out of each individual state auction centre were remarkably and unusually well-aligned in values.

“One exception, and the standout of selling this week, were those few bales of Merino types finer than 16.5 micron which were upwards of 150 to 180 cents dearer.

“Similarly the small offering of super fine (16.6 to 18.5 micron) spinners and best top making sale lots exhibiting strength readings of over 35N/kt sold up to 140 cents dearer, making these wools around 250 cents dearer in just two weeks.”

AWI said perhaps the most stunning gains, particularly in percentage terms, was the entire crossbred (26 to 32 micron) market.

All types rose by up to 70c/kg clean and at the broadest end, representing an increase of around 17pc in a week.

“Carding types continue to chart in their own territory and were the only disappointment of the week by trading generally at firm unchanged levels of price.”

About 37,000 bales are rostered for auction sale next week.

“With prices at such giddy heights it makes it relatively easy for growers to decide whether to hold or sell, but who knows, prices may get even better?”

Source: AWI.

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