Limited demand, poor quality hits wool market | Elders

Limited, poor quality demand hits wool market

Wool
Demand is sorely missing in the Australian wool market.

Demand is sorely missing in the Australian wool market.

Aa

Demand is sorely missing in the Australian wool market.

Aa

EVEN with only a miniscule 15,800 bales being offered last week the Australian wool market was a luck-lustre affair.

Prices for superfine Merino fleece eased by 15c, while medium Merino eased by 50c, dragged down by the poor-quality selection which is continuing to make life difficult for all involved.

While the new season may challenge the market with increased volumes, it will also hopefully bring better quality wools to the fore and allow buyers to put together containers within spec.

AWEX's Northern Market Indicator closed down 33c on 1185c. The 17 micron indicator closed on 1613c, 18 micron 1438c, 19 micron 1314c, 20 micron 1243c, 21 micron 1229c.

Skirtings followed the lead of the fleece market and closed 40-50c lower, while crossbreds were less affected in absolute terms, but still drifted 2-3pc lower.

Cardings, seemingly the only active segment of the market at present managed to hold their ground and finish the week unchanged, although it was hardly something to crow about when the total volume of cardings was less than 1000 bales for the week.

Low demand

Demand is what is sorely missing in this market, despite the extraordinary low level of supply being offered at present. Without constant demand buyers and processors are hesitating to buy more than a few bales of any particular type.

Demand is what is sorely missing in this market, despite the extraordinary low level of supply being offered at present. - Bruce McLeish, Elders Queensland wool manager

The jump in price two weeks ago at the time looked good, but has since dissipated over the past two selling weeks.

If nothing else went awry the trade could now be expected to step back in with a few small orders and push prices up again.

Then, Beijing had a bit of an outbreak of coronavirus and this has sent another shudder through the Chinese processing and retail sector. A quick, draconian lockdown may stifle this outbreak enough to illustrate that these flare-ups can be controlled and allow the recovery to continue.

COVID-19 recovery

As CBA analyst Tobin Gorey pointed out in his daily Agri Commodities report last week the world is slowly coming to accept a more realistic assessment of recovery speed.

Some would have us believe that a 'V shaped' recovery was still possible, particularly the equity traders, whilst most have a more realistic view of the speed of recovery.

Acceptance that the recovery, of whatever speed, will occur despite some of the struggles still going on around the world is positive news. It will be messy as Tobin Gorey points out, and with messy comes a bumpy ride for commodities as optimism waxes and wanes.

The greasy wool market is a perfect illustration of this bumpy ride as it tries to stand up and move forward on what is hopefully the bottom of the price range.

The International Textile Manufacturers Federation recently highlighted just how extended the textile chain is. Fibres can be produced in one country, yarns spun in another; fabrics are woven or knitted yet in another country before the final garment is sewn and shipped across continents.

The textile chain is only as strong as the weakest link in it, ITMF said in a statement on the coronavirus crisis. The industry is obviously facing demand shocks due to lockdowns around the world, which have posed enormous challenges to the retail industry.

Passing the loss and pain to suppliers by cancelling orders cannot be the answer the ITMF said in a recent fibre2fashion report.

Having a retailer cancel orders due to the lockdown in the US for example, causes reverberations all the way back along the chain to the Australian wool grower, as we are currently seeing.

There are not many 'old' orders being delivered without at least some form of renegotiation in delivery time or price of contract in the textile world.

The biggest volume occurs at the base of the fashion pyramid.

At the top haute couture and luxury fashion houses are most able to weather the storm, having bigger margins, a lesser footprint and in most cases a more resilient financial structure.

Below them the so-called bridge brands, diffusion lines and high street retailers are struggling to keep their heads above water.

While at the base level fast fashion and economy retailers have had their volumes slashed, and so the greatest waves flow back along the supply chain.

Although these larger categories may not set the fashion tone, or have fallen in love with wool as they just borrow the trend from above, they do consume a large volume of generic fibre.

This demand, or more accurately the lack of it, is what is being felt in the market.

The highest level of the fashion industry is already looking ahead and deciding what the new normal will mean for their business, and importantly still talking to their suppliers, but the large volume, basic consumer manufacturer is still very much in panic mode.

Hundreds of stores are being axed in some of the largest name chains, and when a normal order runs to tens of thousands of garments, the effect on demand is significant.

At present wool is 'competitively priced' when compared to other fibres and to its historical levels, so we do not now have the issue which started the cyclical downturn back in August 2018.

Yet in the current COVID-19 recovery phase demand is yet to rebuild to any extent.

The odd uniform order in China, or a smattering of Chinese domestic demand for a few knitwear things provides the odd spark.

But the pervading gloom is preventing all but the most optimistic from seeing a way forward.

The recovery will certainly not be a straight line, and it will be messy as previously mentioned, but if we can just get a run of good news, we can actually build a bit of momentum.

It will not take a lot, and the industry is certainly prepared to take small steps, so if everyone gets out there and buys a new woollen garment this week we might actually turn this thing around.

Don't just grow it, wear it.

- Bruce McLeish is Elders state wool manager - Queensland.

PREVIOUS SALES: 'Australian wool market still hanging on'.

Aa

From the front page

Sponsored by