Holding firm but are we at the peak?

THE Australian wool market was slightly firmer again in USD, but the vagaries of the currency market meant that prices were down slightly in local currency terms as the Aussie Dollar firmed against the Greenback. 

In a small East Coast-only auction the AWEX closed 3 US cents higher and lost 8 cents in AUD terms last week.  It was unchanged in Euro and 0.2 per cent or 0.2 yuan lower for Chinese buyers.  

As has been the case all season the better clips performed strongly, while the poorer average and inferior style wools lost some ground and dragged the micron price guides lower in many cases.

Only 21,000 bales were offered in the Sydney and Melbourne catalogues and growers passed in 8.5 per cent of these wools meaning that just over 19,000 bales were actually sold to the trade.  

This week saw all three centres selling in the final week prior to the annual three-week winter recess which comes at a fortuitous time for the trade as many are already more focussed on their northern hemisphere summer holidays rather than actual wool business.  

Typically sales in July struggle for momentum as processing mills and brands are between seasons with all of the garments for the forthcoming autumn/winter season already produced and nobody yet focussing on the distant 2027 spring/summer collections yet alone the further out 2027 autumn/winter designs.  

The designs and concepts for autumn and winter 2027 have been conceptualised and samples created, but mass production is still a long way down the track.

So, the early stage processing fraternity and a few of the more active traders will take the opportunity to fill up their containers to keep the supply pipeline full to ensure that there is no gap in proceedings when the main activity resumes again in mid-August.  

Shipment times from Australia to China have increased slightly and costs are increasing on the back of higher oil prices, but the China to Europe leg is really starting to get expensive and take a long time. 

Costs for transporting a container of wooltop, yarn or garments from Shanghai to a major European port have blown out again to more than 7000 USD and the journey time for the very best service takes a full two months.  

Any cheaper service using transhipment along the way can easily see this shipment journey push out to three months as vessels obviously avoid the Middle East and take the more scenic route around the Cape of Good Hope. 

This adds an extra 50 cents to a dollar per kilo to the greasy wool cost by the time one factors in interest and shipping costs on top of the market rise we have seen this year.

While Europe has declined in recent years as a buyer of greasy wool directly from Australia it remains a vital trend setter, and creator of fashion which everyone looks to for signals.  

The recent series of exhibitions culminated in Milano Unica which showcased fabric from the leading weavers in Italy and surrounding countries.  

Reports indicate that the wool price increases are causing some consternation but that customers were keen to discuss new trends and take away samples even if orders were put on the backburner for now.  

Global uncertainty obviously doesn’t entice customers to place orders for fabric which will be delivered in 12-15 months’ time.  

Where the wool market prices go in the next 12 months is obviously open to a degree of speculation.  

Some customers are already feeling the pinch, having set long-term fabric or garment prices at the beginning of the year and now having some difficult discussions with suppliers every month or two when they need more wooltops or yarn.  

While the price of crude oil has eased significantly from its war-induced spike, jet fuel, bunker fuel, diesel and urea as well as sulphur are still around record highs keeping the pressure on a variety of manufacturers.  

So, someone holding an order for a wool/polyester uniform fabric for a fixed price government contract has some problems sourcing raw materials in the form of 21-22 micron wooltop and polyester tow.  

The price resistance mentioned at the high end of the market in Italy right through to the basic uniform producer in Asia and even the carpet weaving sector in China are all applying the handbrake to greasy wool markets to some degree and we did see the New Zealand market come off by up to 10 per cent last week, although they have had a pretty stellar run this year.

There are some in the trade toying with the idea that wool prices are yet to peak, however, and that by November or December demand will increase we could then see wool prices spike even further than we have seen in the first six months of the year.  

Certainly if the touted European confidence does eventuate and cool heads prevail in Russia and the Middle East to restore consumer confidence globally big things are possible.  

So much good work has been done over the past few years to educate consumers about the fibre, position merino wool in the right space to move alongside the other noble fibres such as cashmere and silk that maybe those wool/polyester uniforms will become a thing of the past.  After all nobody produces a silk/polyester uniform these days.