ACCORDING to the most often used measure of the Australian wool market – AWEX’s eastern market indicator - the market did not change last week, stable on 1525c. However, there were moves of 30c to 40c either way depending on the specifications of individual lots.
AWEX’s northern wool market indicator closed up 6c on 1596c. The 17 micron indicator closed on 2228c, 18 micron 2072c, 19 micron 1778, 20 micron 1588c, 21 micron 1540c, 22 micron 1477c, 28 micron 813c, and 30 micron 586c.
Again the currency was all over the shop with a peak during the week of US80.9c before plummeting to US79.17c the very next day. A rather benign result at the end of the week with wool prices in US dollar declining by a solitary cent, and a loss of Euro5c was the final wash up.
Buyers were busy filling orders sold during last weekend’s Nanjing Wool Market Conference and concentrated on the better spec wools and heavily discounting the tender, high mid-break lines. Merino fleece types fared quite well if the style was high enough, as did most skirtings.
Crossbred wools took a small hit, again with buyers concentrating on the better prepared, better grown lines, but there were enough carding wools sold at the conference to lift the prices of this segment, which had been relatively flat in recent weeks.
The Nanjing Wool Market annual conference has become the premier gathering of the wool trade in recent years and as well as providing a platform to launch new initiatives such as electronic selling platforms, it provides a chance for exporters, traders and buyers to get together, do business and exchange information.
Merino fleece types fared quite well if the style was high enough, as did most skirtings.
This year’s conference was no exception with presentations covering the increased export volumes of woven apparel from China (+160 per cent), which according to Chris Wilcox from NCWSBA was attributed in part to the Chinese Government’s ‘One Belt-One Road’ policy, which is basically the modern Silk Road project they are developing to enhance export potential.
A huge amount of funding and development is taking place to create infrastructure and mechanisms to move China’s products, either by sea or land to markets in Europe and Central Asia. It is providing a much-needed boost to the Chinese economy, although at the expense of government debt, but also facilitating easier access to foreign markets for Chinese manufacturers. At the same time China’s growing middle class is consuming greater volumes of higher value products, so manufacturing in China is actually being given a boost from two directions.
During the conference there was obviously plenty of discussion about the current price level, but certainly not the despair associated with previous rapid price spikes like in 2011. This increase in price has been more gradual, and hopefully therefore more sustainable, with the market being more or less on a steady two year uptrend. Of course some of the superfine charts look a little more dramatic but that is typical of any commodity price cycle.
All this is certainly good for the wool market, although the amount of emphasis being placed on one product range – the Fake Fur and associated products – is a little concerning. The week long Chinese National holiday from October 1 will be the first real test of this product at a retail level, with this period developing in China to become as significant as other spending sprees in the western world such as Australia’s pre-Christmas or Boxing Day selling period.
If the marketing programs have been done successfully, and the huge number of aspirational Chinese consumers chase the new trendy look, it will provide a huge boost of confidence across the wool industry. If not, it could set the market back on its heels slightly and the voices of price resistance will get louder. At the moment there is only a smattering of noise about high wool prices, and generally those companies who concentrate on high quality, innovation and service are doing better than they expected. Hence the disparity in the auction market between better style lines and those that are drought affected, or poorly prepared.
Overall the mood in the trade, from exporters to buyers, early stage processors and spinners and weavers is one of quiet confidence and expectation. This should carry the current market, at more or less today’s price level through until Christmas, by which time more clarity around the 2018-19 selling season will be apparent.
Superfine: A lot of attention will be focussed on the sky in coming weeks or months with unfavourable weather conditions begging to hint at poorer growing conditions, and a corresponding increase in the volume of superfine wool. The volume of superfine wool that the market can absorb at these current prices is obviously limited, and dependant on quality parameters being met, so it will be a factor to watch.
Medium Merino: With 21-micron futures trading at 1540c for December the confidence that current prices, or thereabouts, will be maintained until at least the end of the year is underlined.
Crossbreds: While crossbred wools eased this week, there is a renewed air of confidence that demand is building, and obviously resultant higher prices thereafter.