Sydney, Australia - After a promising start to the selling week, Australian wool sales unfortunately got a touch of the staggers towards the close of selling. The first day saw 5 to 10acents clean/kg added to established quotations, as sale room operators keenly sought all wools on offer. As the exporters gradually covered their commitments, a lack of follow up orders halted prices continuing their rise. As prices had escalated, overseas users became more reticent to follow to the full market price and local exporters wanted to cover more of their outstanding commitments prior to booking up more quantity, so a stalemate was reached. Not all types were affected though as the better Merino fleece of good to best style and strength remained under strong competition throughout, although these types are becoming scarcer with each passing week. The comeback and crossbred selection remained strong and prices remained generally positive relative to last week.
The Merino fleece sector had an extremely confusing week, with market signals differing across the nation. While Sydney and Fremantle markets showed good gains of between 5 and 15acents clean/kg, the larger Melbourne offering faltered and became slightly cheaper by the cessation of selling. These diverging indicators have helped create the sensitive nature of present Merino wool pricing, whereby a booking of just a few hundred tons of wool can alter market direction immediately. With the current hand to mouth appetite for Merino wool, we should eventually see a consistent rise in this sector as volumes decrease globally and auction buyers see this reduced volume as an opportunity to create viable business.
All Merino skirting types suffered with the unknown market direction. Prices at the start of the selling week were largely maintained to slightly stronger. With news of the slight faltering in fleece levels, this area of the market also reacted to the diminishing confidence in the fleece market on the final day. Prices started to settle and in the case of the heavier VM (vegetable matter) types, began to slide a few cents as buyers became more cautious.
Crossbred and comeback types 25 to 32 micron fared much better again this week, and general price increases of 5 to 15acents clean/kg were registered by the close of selling. As mills across the world look for risk averse purchasing, these wools, being cheaper per kg, become more attractive as a more cost effective raw material to use on machines that need to operate.
The Merino cardings sector remains at solid levels, and all prices by the week’s end were at similar to slightly cheaper quotations than the previous week’s closing levels. Next week will see less than 30,000 bales go under the hammer nationwide. With low volumes in Australia, and the last South African offering of the season of 15,000 bales, we expect to see an increase in appetite from our overseas customers. With the slight reduction in prices towards the close of this week, perhaps this may provide the stimulus for manufacturers to secure larger volumes of quality wool before it becomes too late to source low VM, strong staple strength, fine Merino wool.
Commentary from ICAP
Wool prices lifted at the first sale this week, only to drift back on the second sale. It’s amazing how the market seems to be caught in a fairly tight trading range, of 1110 to 1175 on the ICAP 21 Micron Wools for the June Contract. The other observation on a tight, range bound market, is the knowledge that there will be power and speed in the move when it does break out of this trading range.
In wool, let’s hope that’s a break up in price, and with improving global consumer confidence and positive growth data numbers coming from China, Japan, India and the US that would seem to be the more likely outcome. Firming cotton prices also suggest growth in the apparel market. We know however that in this unpredictable world (disputes in Russia/ Ukraine and China/Vietnam) any left field event can wipe the optimism overnight.
The Aussie Dollar is range bound, with many analysts calling the AUD lower, as iron ore and coal prices keep sliding. However if the upbeat global data confirms a slow global recovery, then the Aussie might break to the upside of its trading range.
Source: Australian Wool Innovation (AWI)