Record wool market creeps ahead to 1683c | Elders

Record Australian wool market creeps ahead to 1683c


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The Australian wool market has gained another 2c to close on 1683c.

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STRENGTH TO STRENGTH: The Australian wool market has gained another 2c to close on 1683c.

STRENGTH TO STRENGTH: The Australian wool market has gained another 2c to close on 1683c.

THE Australian wool market seemed to be in two minds this week. Initially it looked as though it would continue to power along and rise further, before having a reality check and easing slightly.

The large offering meant that Melbourne had a three-day sale, and so kicked off proceedings on Tuesday with a surprisingly strong tone. The largest weekly volume of wool in Melbourne since January could have been the catalyst for a drop in prices.

However, with only four weeks until the recess Chinese mills were reluctant to take the foot off the pedal. Merino prices increased, particularly at the finer end, while crossbreds eased a little.

With only four weeks until the recess Chinese mills were reluctant to take the foot off the pedal. - Bruce McLeish, Elders

On Wednesday when the other two centres began selling Melbourne decided to ease in price, while the north and the west copied what happened in Melbourne on Tuesday, so we had a market moving in different directions.

By Thursday the buyers had all communicated with their interstate offices and prices across the nation started to align again with a general sideways tone evident for Merino types and an easing bias for crossbred wools.

Overall for the week the AWEX’s eastern market indicator managed a gain of 2c to close on 1683c. The easing trend was more evident in US currency with a 13c decrease by the end of the week. At the moment the market is beholden to the early stage processing fraternity with actual demand for the fibre somewhere underneath the current price.

AWEX’s northern market indicator closed up 9c on 1776c. The 17 micron indicator closed on 2494c, 18 micron 2303c, 19 micron 2009c, 20 micron 1783c, 21 micron 1647c, 22 micron 1571c, 28 micron 768c, and 30 micron 584c.

The need to keep machinery running for the next three months, bearing in mind there will be a three-week break in sales over Christmas, is actually driving the current activity more so than demand from further up the chain. That is not to say that there is no demand, as stock is not building up to excessive levels at the wooltop stage. But prices for wooltops are struggling to keep up with the current greasy wool market as topmakers push to secure quantity.

If the correction of US13c this week is all we are going to see this side of the recess then the owners of combing mills will get a few more grey hairs while they wait for the tops market to catch up. Or there could still be another correction forthcoming during the next four weeks to ease the price pressure.

Then when sales resume in early January, all being well we should see a further rebound in prices as mills again restock. Although with the Chinese New Year relatively late next year (16th February) it is uncertain how much demand we will see in early January, as wool purchased during the first couple of sales would arrive when the mills will be closed.

Processors around the world are keenly watching the current market and trying to ascertain whether prices have plateaued or not, and their hesitant buying patterns reflect their nervousness. Plenty of spinners in Europe have full order books, and some are even forced to outsource some of their work to commission processors to complete orders on time. But they still remain reluctant to lock in all of their raw material needs at current prices, just in case they can get it a bit cheaper down the track.

A reduction in supply during the second half of the season seems inevitable given the current production stats in Australia, which still indicate current sales are running at almost 10 per cent above last year, when production is estimated to be on par. Argentina has virtually hung up the ‘sold out’ sign as local and international buyers have hoovered up every available clip.

The cheaper northern hemisphere wools are all finished now until the next shearings in May/June next year, so provided there is not a catastrophic reduction in demand, supply could be very tight during the first part of 2018.

China is still showing some signs of further slowing down according to the macro-economic figures with industrial output down another notch to an increase of 6.2 per cent, against a forecast of 6.3pc. Urban fixed asset investment also came in just under forecast with growth of 7.3pc, and retail sales only grew by 10pc.

However, the weeklong National holiday in October may have softened the numbers slightly and when one considers the sheer volume of the consumer market it still has a voracious appetite for goods and services. Given that China continues to take around 72pc of Australia’s exported greasy wool, and a growing portion of this is consumed as final garment in that country an increasing portion of viability of the wool market is determined by the economic stability there.

President Xi Jinping has launched further new programs to continue China’s transformation to a modern world power, and he did look very dapper in his double-faced woollen coat during his meeting with Mr Trump last week.

Superfine: While there are some saying that prices are already too high, there seem to be plenty of people using every kilo they have and stocks are not building up.

Medium Merino:  Although we are unlikely to see another Fake-Fur led push, medium merino still hover around record prices.

Crossbreds: The balloon has deflated quickly, but given current lamb prices it is not the end of the world.

- Bruce McLeish is Elders’ northern wool manager. 

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