Wool market hits​ incredible 1760c | Elders

Wool market up 61c - hits​ incredible 1760c


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AWEX’s eastern market indicator closed the year at 1760c, a rise of 61c for the week.

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END OF YEAR: The eastern market indicator closed the year at 1760c, a rise of 61c for the week.

END OF YEAR: The eastern market indicator closed the year at 1760c, a rise of 61c for the week.

‘TIS the silly season according to some and one can only hope that the activity in the wool auctions for the week does not prove to be such a folly.

Most participants were expecting a firm or moderately strong market with a few orders yet to be filled, and early stage processors in China keen to ensure they have enough machinery fodder to cover the recess period.

Nobody had anticipated the jump of a dollar that we saw in most Merino types across the week, and although prices moderated slightly towards the final pages of Thursday’s catalogue all sorts of new records were set along the way. AWEX’s eastern market indicator surpassed the 1700c barrier with ease to close the year at 1760c, which gave it a rise of 61c for the week.

Superfine Merino is still way cheaper than Cashmere. - Bruce McLeish, Elders

AWEX’s northern market indicator closed up 59c on 1841c. The 17 micron indicator closed on 2538c, 18 micron 2300c, 19 micron 2086c, 20 micron 1883c, 21 micron 1745c, 22 micron 1642c, 28 micron 785c, and 30 micron 590c.

The indicative price for a bale of 17 micron wool is $2999, 19 micron $2489, 21 micron $2070, 23 micron $1885, and 28 micron $956.

In US dollar terms the rise was slightly higher at US67c as the Australia dollar strengthened on news of lower than expected CPI figures from the US and the Federal Reserve’s inability to crank up inflation over there. The European fraternity, who for the most part of the week were sitting quietly on the sidelines watching the ‘craziness’ of the market unfold, eventually saw a jump of Euro54c in the EMI.

Certainly the low levels of greasy stock in China has been a factor weighing on the minds of early stage processors, together with an anticipated lower volume offering in January given that many clips normally held until then have been sold already, and a handful of December shipment export orders that needed to be filled. This produced an almost frantic burst of activity from the opening lot in each selling centre with medium Merino fleece types being the most sought after wools.

This fibre is being used to re-fill the almost empty pipeline that has occurred as everyone in China has been focussed on fake-fur, double faced fabric and other innovative types. The production season for more mainstream garments is now well under way and as previously mentioned the pipeline needs to be filled so that mills can make deliveries to their next-in-line customer.

The current prices will definitely pose a challenge for many in the industry. Such a dramatic rise rarely goes without a corresponding correction of some degree. However, the three week recess does give people plenty of time to mull over their next move. Perhaps this activity was just the market ‘getting in early’ and it may continue in January, as we have often seen similar drastic moves occur in January/February. Or will the building voices of discontent force a reality check to unfold when sales resume again in 2018?

There are numerous fabric makers and garment manufacturers asking what is going on at present – they feel they have not created this price surge and are not sure it will be able to be absorbed or passed on without affecting demand for their products. The talk of increased blends with synthetics and such is becoming a little louder already. Other sectors are still buying happily – although maybe through gritted teeth – purely to get raw material to feed their machinery.

The challenge now faced by the wool industry is to balance the different drivers and ensure that the enthusiastic appetite of the early stage processors does not kill off demand further up the chain. If every manufacturer in the wool industry were a vertical operation, buying greasy wool and selling finished garments, the price signals and management would be a much more simple yet constrained process.

However, when a large proportion process only one stage and then sell that unit to another customer the focus can be much more short sighted and create sporadic, volatile market movements such as this week’s auction result. For the best part of two years the wool market has been climbing mostly slowly and smoothly. In August we experienced a short-term jump of one dollar for 21-micron, which then dissipated over the next four weeks to resume the slow and steady climb that satisfies the majority. Hopefully this flash in the pan will moderate as the ripples subside during the three week recess and slow and steady increase can again become the norm.

After all, superfine Merino is still way cheaper than Cashmere and that price range is the long-term target for the industry to focus on.

While the Australian wool auctions have a break and then resume activity again on 9th January there will be a couple of private sale opportunities for exporters to fill up containers, and the Riemann futures market operating for those who wish to buy or sell over this period. On the charts, particularly in US dollar terms there is no cliff face in front of the merino fleece types with all microns still well below the heights reached in the 2011 boom – however a rather dramatic halving of prices in the subsequent season quickly followed that boom.

To avoid a repeat scenario a much more measured approach than what we saw this week will be required. Hopefully the recess allows the market to settle, and then resume its steady upward momentum again in the New Year.

- Bruce McLeish is Elders’ northern wool manager. 

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