THE overall wool market indicator showed very little change again last week, with AWEX's Eastern Market Indicator dropping just 7c to 1936c.
However, the established pattern continues with good types firm to dearer, and the poorer types continue to drift lower as buyer appetites for those lots is still limited.
Crossbred wools continue to be the star performers with gains of up to 70c for some micron groups. Skirting wools generally followed the fleece market, while the carding sector appears to have found a base.
AWEX's Northern Market Indicator closed down 8c on 1978c. The 17 micron indicator closed on 2497c, 18 micron 2410c, 19 micron 2293c, 20 micron 2272c, 21 micron 2264c, and 28 micron 1205c.
With one more sale before the traditional Easter recess there is little chance of a major change in direction or price. The moment of truth will more likely come to the fore in May, which is going to be a very interesting time.
There are some green shoots of demand emerging in China on the back of government stimuli but it remains to be seen if these will be strong enough to kickstart this processing season again or not.
With South African wool still unable to be shipped to the Chinese processing mills the pressure to find enough suitable wool for the better end types continues to build. The best indications at present for a resumption of shipments from the Cape seem to be June, but brokers and industry bodies in South Africa are working fervently with the Chinese authorities to find a resolution sooner.
Given the negligible quarantine issue posed by wool which has been harvested, baled and stored for weeks as well as the pending transit time it is frustrating for all involved not to be able to resume operations yet. But the international health and quarantine protocols surrounding foot and mouth disease and other notifiable diseases are incredibly strict and it is virtually impossible to fast track a resolution.
When Argentina had a similar FMD outbreak several years ago the process took the best part of six months and so a June timeframe for the Cape would be consistent. With some Chinese buying entities coontinuing to operate in the South African market, albeit on a more limited basis, there is a build-up of stock taking place in warehouses in Port Elizabeth that will eventually be loaded and head to China on the fastest available vessel.
The timing of the arrival in China of this South African wool may create a ripple in the market, or it may simply fill a void created by falling Australian supplies.
The timing of the arrival in China of this South African wool may create a ripple in the market, or it may simply fill a void created by falling Australian supplies. Given the propensity of biannual shearing in South Africa and therefore a very high proportion of premature shorn wools virtually all worsted top making blends will only contain a proportion of Cape wool, together with Australian fleece.
So, when the South African wool does eventually get released there will still be a demand for Aussie wool to complete the blend, thus for the worsted sector at least it may not have a dramatic effect on the Australian market.
Woollen types may be a different story, but for both industries the most frustrating part is the unknown timing of the release. And of course, the financing cost of the wool being held in storage is a considerable burden in anyone's currency.
Number eight is considered lucky in the Chinese culture, and so hopefully the 88th IWTO conference held last week in Venice proves to be just that, and triggers a reversal of the long slow grind down in prices that we are currently experiencing. China has become a hugely important consumer market for Australian wool, rather than just a manufacturing base as it was 20 years ago, but Italy is possibly growing in importance again as a producer of woollen garments after years of decline.
Given the persistent change in position on the textile pyramid of Merino, towards the pointy end and arguably noble fibre status, the Italian processors are now punching above their weight again. Anybody can create a simple cloth, but for centuries the Italians have excelled in creating the high-end quality products that create demand just by existing.
As Chris Wilcox reported in the last weeks NCWSBA newsletter a presentation at IWTO by Giovanni Schneider contrasted the Italian Merino apparel fibre usage of 10.6 per cent with the global average of 1.1pc. Other countries producing commodity clothing obviously use less than the average, but it does highlight that merino is moving more and more towards the noble fibre spectrum. This should be received with great enthusiasm as it allows for so much more upside in the price compared with the old commodity boom and bust cycle.
At the IWTO conference there seemed to be a considerable amount of discussion given to the differing trends of merino and coarse wool with the former going ahead in leaps and bounds, whilst the latter has had to rely on a fall in price until comparison with synthetic fibres was favourable enough to generate demand.
It was not so long ago that merino wool was also stuck in this comparison cycle with cotton and polyester, with the inevitable boom and bust scenario. To have broken out of the shackles and to have the opportunity to chart a different course was unthinkable even 10 years ago, but it is something that the industry must now lock in.
Perhaps the time has come to split the fibre into two separate and distinct categories rather than simply call everything wool. Not an easy task given the vast array of breeding traits, environmental and husbandry differences across the globe, but maybe the move towards provenance will actually do it for us.
- Bruce McLeish is Elders northern wool manager.