ANOTHER solid performance at the wool auctions this week as early stage processors around the world kept orders flowing to keep their machinery busy.
Wool is moving rather reluctantly along the pipeline at present. However, the auction market is still performing very well in most sectors. The superfine and fine Merino registered the best numbers for the week, and discounts for lower style lots were still apparent, but much reduced in severity compared to previous weeks. The processing trade is still avoiding high mid breaks lots, but other faults are becoming more accepted as they look to accumulate enough mill fodder to keep machinery busy.
Medium Merino fleece followed the same pattern but generally added 5c to 10c as opposed to the 30c or 50c in the superfine area. Skirting wools with good specifications followed their fleece counterparts and carding wools we also strongly sought after. Crossbred wools unfortunately went in the opposite direction and eased by as much as 30c.
AWEX’s eastern market indicator closed up 16c on 1566c. The northern market indicator closed up 27c on 1656c. The 17 micron indicator closed on 2301c, 18 micron 2156c, 19 micron 1886c, 20 micron 1681c, 21 micron 1589c, 28 micron 753c, and 30 micron 526c.
Processors of Australian wool based overseas are still struggling with conversations regarding the price of their products for the new season. Retailers are wanting to see how this selling season performs before committing to prices that are higher again than the garments they are currently waiting to sell.
Retailers are wanting to see how this selling season performs before committing to prices that are higher again.
- Bruce McLeish
Spinners seem to be flatly refusing to absorb more price increases at present, leaving the topmaker stuck in between petulant customers and an increasing greasy wool market. Something will give at some point, but there are some interesting discussions taking place, and drawn out ones at that. Normally a deal for wooltops will take a short conversation, two or three emails, testing of a sample and then the contract is issued. However, currently some decisions are stretching out over weeks rather than days.
The Intertexiles Exhibition for Apparel Fabric is currently being held in Shanghai and the early indications are positive for Merino based fabrics and in particular the double faced fabric that has been around for a couple of years now. If the number of visitors is any indication of sales success, it should be a good event with early media reports showing large numbers gathering at most booths. How active the consumer is over the next three months will be critical for the wool market right along the micron band.
At present the strong premium for superfine Merino - which has been running for nearly a year now - will be challenged by its normal cycle that usually lasts for nine to 12 months, and also possibly an increase in supply next year if dry conditions persist. On the other hand price resistance is less talked about at this end of the spectrum currently, and there is also the swathe of new innovations that have led to new demand.
Fine and medium Merino obviously make up the bulk of the volume of the Australian clip and so must find the bulk of product sales as well. Some areas are already challenged or disappearing such as the cheaper end of the uniform market, while others are adjusting the blend components to cope. Sales of fake fur and other products in the Chinese domestic market will have a big say in whether the two year uptrend in price will continue in 2018 or not. If the consumers in all of the important markets for wool follow the indication if the IMF, which this week raised their global economic outlook by a couple of notches, sales of clothing will also increase.
As Chris Wilcox from NCWSBA points out in his weekly newsletter consumer confidence in all major wool-consuming countries is increasing. Sales of clothing for the year-to-date are higher than the previous year. However, 2016 was a shocker in many markets, and we are just entering the major selling period for woollen items being the traditional autumn/winter period.
The currency was favourable for Australian exporters this week with prices rising more in local terms than in US or Euro terms and the outlook would seem to indicate more of the same. This week saw the Australian dollar fall to a three-month low of US77.3c as the RBA signalled that all was not well on the economic down here. Conversely the US economy continues to grow quite strongly and the US Federal Reserve is very likely to hike interest rates again in December. Across the Atlantic, Germany continues to drag the rest of Europe towards the sunshine with export numbers rising by 3.1 per cent in August, the strongest month in a year.
So the Euro is also gaining strength making Australian wool not quite as expensive over there. China had also been a cause of concern for the world’s economists. However, now most of them agree that 6.5pc growth in China will be achieved comfortably this year, and the government has been able to keep the housing market largely under control. Government debt in China is huge, likewise in the US and Europe, so perhaps that is just something we have to learn to live with these days.