Currency markets hold key

MORE of the same for the Australian wool market with prices virtually unchanged in an overall sense when viewed in USD, as most of the customer base does, and for Australian growers’ prices were eight cents higher as measured by the AWEX EMI. 

So most published market reports showed a nice green tinge throughout with the only exceptions being type small selection of 26 micron in Melbourne, and the carding indicators in both Sydney and Melbourne. All other MPGs showed a positive movement for the week as did the skirting wools, with some stylish superfine wools again leading the charge. 

The mood among the buying fraternity is generally positive although frustrated at the lack of demand which makes it difficult to sell wool for prompt shipment, and the lack of supply which makes it difficult to buy attractively priced stock lots. 

Many exporters are heading to China in a couple of weeks for the Annual Nanjing Wool Market Conference and they would normally purchase a few stock containers to offload during the conference, but the scant offering at present is making it exceedingly difficult to put together anything exceptionally cheap to offer to their customers. 

It will be more of a meet-and-greet affair than a general selling opportunity. No doubt many will be trying to predict when this market could actually grow some legs and move in a more positive direction. 

September is rarely the month when we see much more than a stable market as it is the crossover between summer and winter collections in the stores, and this year is particularly subdued at a retail level for a host of reasons. 

The trade does still hold a generally positive outlook for a better environment than we currently have and the general consensus seems to be for late-October or November for positive signs to emerge. 

Prices for the next couple of weeks are expected to remain similar to what we saw this week, and hopefully the currency does the right thing to put a few more cents in grower’s pockets, but there is no way to predict which way the currency market will react in this volatile global market. 

Much of the currency market volatility should be dispelled by the Fed Reserve in America’s decision this week on its interest rate setting. 

The European Central Bank cut its interest rates by a further 25 points as expected last week and a further similar cut is pencilled in for October which would be the third such reduction and should soon start to have a positive effect on the important European economy, which alongside China remains such an important consumer market for the wool industry. 

Italian weavers have been doing it especially tough of late with sales of fabric down 20-30 per cent for the year. 

Knitwear producers are fairing a little better and at least one major apparel producer is taking advantage of current wool prices to seek to buy their whole commitment of wool tops for the 2025 season. 

In other European news, Mario Draghi, former Italian Prime Minister and former president of the European Central Bank, released a report setting out the challenges for the European economy if it is to remain competitive globally and maintain living standards for its citizens. 

Together with a reduction in red tape and regulations, massive investment equivalent to around 5 per cent of current GDP is required to sustain technological advances and provide an environment where businesses can thrive. Like many western economies the drive to lower their carbon footprint is coming at a cost to consumers, which is only adding to the current textile industry’s woes. Whether the herd of 27 cats can be convinced to endure some short-term pain for longer term prosperity remains to be seen. 

In China, where they have experienced a record high temperature for the month of August, consumer confidence remains the most challenging aspect for the wool industry. 

Given the impediments to consumer spending of a stock market which is down circa 20 per cent for the year, stagnant if not reduced property prices and much less job security than before, the embattled Chinese consumer is simply reluctant to spend particularly on garments for their winter collection. 

A decent run of chilly weather would change this considerably and there was also an utterance from President Xi urging the country’s central and local governments to properly implement economic policies for the third and fourth quarter alongside rumours of new stimulus to support the economy. 

Given the current negative foreign investment and sluggish local economy the Chinese Government is obviously struggling to balance the budget and so have just announced an overhaul of the retirement age laws to tackle the economic pressure of a shrinking workforce. From Jan 1, 2025, the retirement age for men will rise from 60 to 63. 

For women in white collar jobs, it will be raised from 55 to 58 and for women in blue collar work the current retirement age of 50 will be increased to 55. 

No doubt it will be unpopular with many, but a necessary adjustment and hopefully there will be a few more sweeteners to offset the angst. In the interim most people in China are enjoying a couple of days off for the Mid-Autumn festival. 

So, for those not feasting on moon cakes the wool market should remain range bound for the next few weeks. 

Technical support levels for both fine and medium wools remain firmly in place indicating relatively little downside for the current market, but an increase in prices will need to be driven by a better demand picture emerging, which will hopefully take place as the calendar flicks over to October.