Wool market reveals calm compared to recent times | Elders

Wool market reveals calm compared to recent times

Amazingly, last week's wool market was calm compared to recent times.

Amazingly, last week's wool market was calm compared to recent times.


The Australian wool market was calm compared to the volatile, petulant affair of the past few weeks.


AMAZINGLY, last week's wool market was calm compared to recent times and not the volatile, petulant affair of the past few weeks.

The first day of selling opened weaker as most in the trade had expected going into the week with the higher quantities rostered offsetting the few new orders around.

But more like the polite, gentlemanly affair they conduct in over in Port Elizabeth, South Africa where the auctioneer asks a question and the buyers politely give their price, the market settled very quickly and calmly.

After the prices had eased on Tuesday, only by a relatively small 30c or 40c, a base was quickly established, but rather than launch upwards, the market gently moved off in a positive direction.

This staid, steady movement was welcomed by all in the trade as the previous moves of up to 100c had been starting to wear a bit thin.

Overall the market movement for the week was a decrease of 30c, US24c or Euro22c, all of which equate to around 2.5 to 3 per cent which would not be enough to make the Alan Kohler segment on the ABC news.

AWEX's Northern Market Indicator closed down 38c on 1214c. The 17 micron indicator closed on 1806c, 18 micron 1570c, 19 micron 1386c, 20 micron 1229c, 21 micron 1188c, and 28 micron 559c.

The positive tone appears set to continue this week with plenty of follow up inquiries on passed-in lots reported, and also a few more genuine bids appearing on the Riemann futures platform.

With Chinese, and international retailers still tallying up the stock movements from the Singles Day online shopping extravaganza in China the previous week, where something like $115 billion worth of merchandise changed hands on just the two major platforms Alibaba and JD, there is hopefully a bit of restocking taking place.

How many new garments need to be purchased to refill these virtual shelves is still a big question.

The popular double-faced fabric garments tend to be an autumn or spring collection, whilst heavier coats and puffer jackets come into vogue during winter.

The fake fur fashion has fizzled this year and with a decent amount of this fabric already lying around in warehouses and production facilities waiting for a new home, this product is unlikely to provide a boost for the crossbred wool market as it did a couple of years ago.

The sweater trade, although still missing the crucial export segment seems to be rolling along and basically providing the lion's share of current demand from the Chinese domestic market.

With the COVID induced supply problems of cashmere this season superfine Merino is comfortably filling the void, and will hopefully convert a few of the aspirational consumers across to Merino.

To roll out an old adage with a modern twist - if we sold one Merino workout top to each Chinese yuppie we would have a shortage of wool. - Bruce McLeish, Elders

The big failure this year has been the worsted fabric sector but all is not lost. Decidedly less obvious fashion trends in the worsted sector compared to the colour based woollen industry will allow most of the fabric lying in the pipeline to still be used in coming years.

A grey pin-stripe suit can always look fresh and new, and as soon as the world's office workers have their vaccination certificates they will want to look good when they stroll back into the office.

Not all will go back to daily office work, but a large proportion currently working from home, or simply locked down will be itching to get back out there.

In the meantime, the importance of the Chinese consumer to the wool market continues to grow. Not from any government orchestrated plan, but purely from a calculation of numbers and the ring fence of COVID.

In recent years Chinese consumers purchased a large volume of goods, particularly in the luxury sector whilst they travelled across the world.

In part this was driven by the major luxury brands charging more for the same garment in their Shanghai or Beijing stores as the Chinese market exploded - because they could.

Once the canny Chinese consumers cottoned onto this, they began to save their purchasing until they were abroad, and those same luxury brands saw a boom in sales from Chinese tourists in Moscow, Milan and Paris.

Now that Chinese tourists are grounded - like the rest of us - they are shopping within China and so boosting the statistics for apparel sales right across the spectrum, but definitely for woollen clothing.

China's woollen clothing purchase volumes of 125mkg now account for more than the next three countries combined with US second at 50mkg, Japan 34mkg and Germany 31mkg according to a report by Delta Agri-consultants.

These figures were 2019 numbers, so with the quick recovery from Covid in China, but the lag in recovery across the US and EU one can only presume that the gap would have widened further.

How the wool industry, and in particular the Australian Merino industry promotes its product to this massively important consumer market will be key to the fortunes of the Australian wool grower in years to come.

While the wool industry is fairly traditionalist, and loves to maintain ties to its historical roots, the new consumers often react to a different message, compared to the old traditional markets.

Some of the new marketing campaign material may seem a little "out there" to the average Aussie wool grower, but much of it, like the recent AWI collaboration video for the Chinese market is exactly what these cashed up, environmentally conscious, upwardly mobile millennials are looking for.

The sheer size and potential of the yuppie market across China is staggering when one looks at the population. To roll out an old adage with a modern twist - if we sold one Merino workout top to each Chinese yuppie we would have a shortage of wool.

With this recovering market and others hopefully soon to follow, we may just scrape through the rest of 2020 with the market intact.

Certainly, if we can bubble along, plus/minus 30c until Christmas everyone will be satisfied.

Getting confidence to flow back down the pipeline from satisfied retailers through to garment manufacturers and wool processors in time for the January restart is the challenge.

- Bruce McLeish is Elders state wool manager - Queensland.

CLICK HERE for last week's report: 'Volatility remains, but wool market unchanged'.


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