Withdrawals, high pass in rate results in scramble for wool
A familiar pattern continued at the Australian wool auctions last week, with a large initial offering, a decrease in price leading to large withdrawals and more wools passed in, before a scramble for quantity kicked prices up on the last day.
AWEX’s Northern Market Indicator closed down 14c on 1355c. The 17 micron indicator closed on 2148c, 18 micron 1833c, 19 micron 1546c, 20 micron 1308c, 21 micron 1250c, and 28 micron 510c.
Initially the build-up in quantity after the one-week Easter recess saw around 54,000 bales would be offered.
This was pruned back to an even 50,000 bales before the first bounce as it didn’t seem that buyers had suddenly found a heap of demand.
After a pretty doughy start the pass in levels rose with up to 20 per cent of the Fremantle wools heading this way.
On Wednesday, the second selling day the currency increased quite sharply, just to add another factor into the mix and again buyers remained circumspect and tentative for everything except the superfine merino types.
By the time Melbourne brokers dusted off the gavel early on Thursday some overseas buyers were asking if they would get their orders filled this week, and some were inquiring about the cheaper prices being bandied about, so the mood for most types was decidedly more positive.
After the last lot had been dispatched the overall market had closed 9c lower.
Currency changes meant that the US dollar prices were actually 7c higher but Euro prices were 12c lower – such are the vagaries of the international currency markets at present.
The whole week saw most attention focused on wools finer than 18.5 micron as China appears to have concrete demand for this sector from its domestic market.
Medium Merino, particularly the lower yielding faulty types which are coming through, as leftovers from the drought, or fresh new wools struggled to find favour, but once demand does increase buyers will renew their focus and step on the pedal as the majority of the wools beneath the dust and burr is very good in processing terms.
However, demand is the missing factor for this segment with whispers of uniform orders not actually generating demand, and a fair quantity of stock purchased over the previous six months still making its way slowly through the system.
Skirtings and carding types actually closed the week in positive territory provided the specs were okay, and in some cases brought very good money as indent buyers followed instructions to the letter, when they could have actually purchased fleece for the same money.
Such is the case when a lot of the products in China are being processed on the woollen or semi worsted system and so require shorter wool inputs.
The indent operators, or the less adventurous processor requests the traditional ingredients for his or her recipe without actually realising that fleece wool is selling for a similar price and will provide a much higher processing yield, even if it is cut later to achieve the shorter length before making the yarn.
Crossbred growers can be heard gnashing their teeth when their wool broker calls them, as they load the final truck of prime lambs and cast for age ewes at record prices.
Unfortunately, it is a simple case of producing the same product as everyone else in the world, a 26 to 32-micron wool, for which there is no current fashion led demand.
The fake-fur juggernaut has moved on, or become a finer, softer product and not enough designers or creators have been able to find a ‘new’ product to excite the market.
Similar to Medium merino, the ‘old’ stable of products are just not cutting it these days, especially in the post pandemic world, and particularly when South America, Europe, Russia and even China also produce a fair whack of the same wool.
Merino wool undoubtedly has less competition globally, and has settled into a new, totally different niche in which it currently looks very comfortable.
Chinese consumers, like the rest of us are banned from travelling the globe, and spending money in overseas locations.
Like many Australians they have more disposable cash at present as the airlines and hotels around the world miss out.
But, those local companies who can offer a similar garment to what was previously purchased in New York, or on a High Street in London or Europe are doing very well.
Through sheer weight of numbers, the Chinese consumer is supporting a large chunk of the Australian/South African merino production as they purchase the new range of next to skin, active and leisure wear, together with some very fancy knitwear garments in a wool/cashmere composition.
As mentioned, a lot of these garments have previously been purchased in overseas locations by travelling Chinese consumers, and they are now being purchased in situ, or online.
But, the concern within the industry is still about the European and American consumer market, which surely cannot be replaced entirely by the cashed up Middle Kingdom.
Data out of the US shows what a trillion or two dollars will do to create economic activity, with so many measures in the states now getting back to Pre-Pandemic levels.
Add in the seemingly successful vaccination program being rolled out over there, and just maybe, the American consumer will be back in the ring by the time the new Merino wool products hit the shelves in September.
It seems a long way forward, but those in the processing chain are used to operating on this sort of time-frame and plenty would be watching the horizon and getting ready to ramp up their activity accordingly.
The news out of Europe is less buoyant, but a lot of European production makes its way across the Atlantic, so the first stage in a European recovery is no doubt an American recovery.
Some European processors, without having seen a dramatic bounce, have actually accumulated enough orders on their books to have to start to juggle production schedules.
Moving back down the processing chain, and the next month is critical for market activity in Australia.
If progress continues, demand will increase, prices will increase – but too much supply will snuff out the flame.
Article written by Bruce McLeish, Elders state wool manager, Queensland for Queensland Country Life 19 April 2021. Article reproduced with permission.
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