MORE than half the wool scheduled to sell at Australian auctions this week went unsold as growers balked at the biggest market downturn in more than 10 years.

Lack of buyer confidence attributed to declining retail demand in China, the China-United States trade tensions and a slowing global economy dropped prices in Sydney, Melbourne and Fremantle by up to more than 200 cents for some micron categories.

AWEX senior market analyst Lionel Plunkett said the market downturn was met with very firm seller resistance, with 16.7pc of wool withdrawn prior to sale, followed by a passed-in rate of 35.8pc, the highest figure since 2003.

Mr Plunkett said the market opened with the prices generally 100 cents below those achieved at the previous sale.

“The lack of buyer confidence meant that prices deteriorated as the series progressed.

“By the end of the first day prices had generally fallen by 110 to 140 cents and the AWEX Eastern Market Indicator (EMI) fell by 112 cents on the back of the losses, a reduction of 6.7 percent,” he said.

“In percentage terms, this was the largest fall since 2008.”

Mr Plunkett said the weakness continued on day two with the market unable to find a solid level, as buyers continued to lower their basis as the sale progressed.

“The EMI lost a further 51 cents, losing a total of 163 cents for the series and closing the week at 1513 cents.

“The EMI fell by 9.7pc for the series, again the largest weekly fall since 2003,” he said.

“The last time the EMI was at this level was June 2017.”

Mr Plunkett said the highlight of the week, in an otherwise gloomy market, was the good support for non-mulesed types.

“A small number of buyers competed strongly for these types, pushing them as much as 200 cents (clean) higher than similar types.”

Mr Plunkett said the suspension of wool auctions in South Africa has reduced the overall global supply, but this did little to bolster demand here in Australia.

“Major auction players were again absent and those buyers that were active continually reduced their buying basis as they accumulated wool.”

Buyers desert the market – AWI

The Australian Wool Innovation weekly market report said the majority of buyers deserted the Australian auction markets.

In A$ terms, the EMI last traded around the 1513-cent level at the end of September 2017 (1522 cents). The A$ EMI has traded above the 1513-cent mark for 23 of the past 30 months since March 2017 and has averaged 1783 cents during that 2.5-year period. Prior to that, the 2.5 year average (August 2015 to Feb 2017) EMI was 1222 cents. The 5-year average A$ EMI is 1496 cents or 17 cents below today.

“In US$ terms the decaying demand is more starkly evident,” AWI said.

“The current US$ EMI of 1026 cents last traded around that number in January 2017 (1032 cents).

“The US$ EMI has been above today’s number for 32 months of the past three years, which has seen that indicator average US1265 cents during that period,” AWI said.

“Prior to that, the two-year average was US913 cents.

“The five-year average US$ EMI is 1126 cents or 100 cents above today.”

AWI said the pre-sale sentiment was massively negative this week.

“Exporter buyers reported intent “to buy” from overseas was impossible, with even a low bid/offer lacking almost entirely.

“Just minimal carbonizing orders were still available, but at reduced rates and the odd European types were needed, but overall demand for the standard China types was practically nil.”

AWI said the Sino-US trade imbalance dispute and to a lesser degree Brexit, have been the dampeners on the mood of the global economy.

“But this week saw the emergence of recession in the US talk as the inverted bonds yield issue came to the fore.

“Consumer and manufacturer confidence continues to take a hammering and most have taken flight to safety and are sitting on their hands (and money).”

AWI said superfine Merino (finer than 18.5 micron) fleece types dipped by 150 cents and the broader Merino fell by up to 200 cents.

“Skirtings were also 150-200 cents cheaper, as were the crossbreds.

“Cardings were the least affected and dropped 30 cents for the week.”

AWI said the tone of sale rooms was dreadful, with just three or four companies participating within the type categories.

“The two largest top makers, plus two traders, were picking off the majority of the sold lots but significantly 35.8pc was passed in and 16.7pc was withdrawn prior to sale, representing over half of the original scheduled volume failing to meet the price expectations of the sellers.”

The western region has a one-week recess next week, with only Sydney and Melbourne operating and scheduling 33,696 bales.

Click here to see the latest AWEX Micron Price Guides.