Stellar wool market marches along | Elders

Stellar wool market marches along


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ONGOING DEMAND: AWEX’s northern market indicator closed up 8c on 2153c.

ONGOING DEMAND: AWEX’s northern market indicator closed up 8c on 2153c.

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AWEX’s northern market indicator closed up 8c on 2153c.

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THE Australian wool market continues to move along quite steadily, managing to negotiate the competing push and pull forces of supply, wavering demand, currency and a poorer quality offering.

In true wool market style, even among all the noise generated by the mentioned factors AWEX’s Eastern Market Indicator was virtually unchanged in local currency terms with only a minor 2c drop.

AWEX’s northern market indicator closed up 8c on 2153c. The 17 micron indicator closed on 2989c, 18 micron 2669c, 19 micron 2443c, 20 micron 2324c, 21 micron 2285c, 28 micron 968c, and 30 micron 728c.

Those customers operating in Euro registered a 15c drop, while those Chinese local traders seeking lower prices saw a bit more relief with a decrease in price of just over RMB1/kg. The main game for the world wool trade remains the US dollar price and that eased by US19c/kg which will please those in the trade seeking a bit of respite from the current high prices.

It is by no means a bad thing for the market to be settling down a bit at present as demand has backed off, so market prices must follow for the wool market to retain credibility. If the market keeps rising when demand is subsiding at some point there will obviously be a reckoning, but this small sort of movement should be enough to take the pressure off.

Demand is not falling dramatically, but merely backing down a little whilst the processing trade in general, but particularly in China goes about their sampling and exhibition procedures. In Europe people are actually ramping up activity as their exhibitions have largely been done and won, and orders are now beginning to drift in to the processing lines.

In Shanghai this week the Spin Expo trade fair was held where just about every serious spinning company in China exhibited, along with quite a few from overseas. The exhibition allows the spinner to explain to customers what they have created, which colour combinations they feel will resonate best with the consumer, and which fibre best illustrates the story behind the garment.

One of the larger woollen spinners in China, and one very much at the forefront of merino fibre usage, Xinao Textile held a fashion show during the week where their newest yarns had been transformed into colourful garments and paraded before the assembled guests and media. Normally pink, orange, red and brown would not appear in the same wardrobe, but it actually works. So is the creativity of the designers who envisage a new series of colour combinations and then showcase them together in a set of garments.

There is no doubt that if we were still relying on the traditional suit and sweater market the demand, and therefore price of Merino wool, would not be where it is today. - Bruce McLeish, Elders

At Spin Expo not everything is wool, and there were numerous other fibres being used, but remembering that wool only makes up something like 1.3 per cent of the worlds apparel fibre consumption, it is definitely well represented, and oft discussed.

Attendees were amazed to see the line-up of products on display at Woolmark/AWI stand that are being developed in partnership with some of the world’s leading processors. Ranging from ‘denim’ fabric, knitted sports jackets that are lightweight and virtually impossible to crease to running shoes with fabric made entirely of wool highlight the breadth of uses in play for Merino in this current era.

There is no doubt that if we were still relying on the traditional suit and sweater market the demand, and therefore price of Merino wool, would not be where it is today.

The better positioned (strong customer base), better connected (good supplier relationships), and best managed firms (forward thinking) are those who complain least about the current price of wool. There are still different opinions when it comes to the outlook for price – some are bullish, some less so, and some are downright frustrated by the lack of current inquiry.

When pressed they do admit that early September is always quiet in China for the early stage processing industry. Spin Expo takes place for a reason – so that spinners can showcase their new collection, talk to buyers about the products and then get orders placed. Then these orders filter back down the chain to topmakers, and scouring plants and ultimately back to greasy wool auctions in Australia.

It is definitely the topmakers who are feeling the pinch at present having limited inquiry, a need to continue to operate machinery, and a raw material market that will not ease. So, they face the challenge of continuing to buy, but with very limited guidance from their customers about what types and price levels they will be able to sell their product at. Nothing new here though, and the overcapacity that still exists in this segment of the processing chain simply exacerbates the feelings.

Spinning mills operate when things are quiet, but they have the option to just produce a basic raw white yarn, that can be transformed at a later date into a more specific item and subsequently dyed to suit the final order. The top maker must make a judgement call on which type to produce as changing or reworking a wooltop is usually not commercially viable.

So, the next few weeks will be testing for the wool market. It will be just a matter of time before more orders find their way back down the pipeline to the early stage processors. But which micron, style and quantity are still a bit unknown as the spinners, knitters and weavers are still trying to convince their customers to purchase products at this new higher price level and there is bound to be some adjustments to composition in order to meet the price expectation. The amount that the demand side decreases will probably be more or less balanced by the reduction in supply this year so prices will inevitably go up rather than down in the long term.

- Bruce McLeish is Elders’ northern zone wool manager. 

RELATED STORY: ‘Strong Merino wool market gains 10-30c’.

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