Wool market gains ‘ticker'

 THE AWEX EMI rose by 54 cents in local currency terms, and with currency markets finally stable for more than one day the movement in USD was similar with an increase of 49 cents for the week.  In Euro terms the market was 37 cents higher and Chinese buyers saw a similar 3% increase or 2.89 yuan per kilo.  Price increases were fairly consistent across the micron range with all merino indicators seeing an increase of between 40 and 80 cents.  The poorer types were solid, with the better wools extreme as buyers struggled to fill orders.  Chinese indent buyers operating on a washing yield were aggressive even on those lots with a high vm content.

Skirting and carding wools both followed their fleece counterparts and rose by 30 to 50 cents for the week.  Crossbred wools continued to also cruise upwards with the finer ones being used in blends and the coarser wools finding plenty of support for pure wool brushed fabric and wool/acrylic yarns for sweaters.   Further along the micron spectrum the New Zealand market was extremely hot after a week off.  Last week the internet tender sales had increased by around 5%, and this was extended somewhat at this week’s physical auctions with most types quoted 5-7% dearer.  Similar to this side of the ditch, New Zealand is facing a dramatic supply shortage as years of poor returns have encouraged growers to switch to other enterprises such as beef or forestry or shedding breeds.  Now prices are at a fifteen year high and wool production looks very profitable again, but the supply is stabilising at best as those who have exited the industry cannot easily reverse their production enterprise and get back into wool again.

 Demand for carpets and bedding product has definitely increased globally and for many manufacturers the simple operation of simply buying what they need one week prior to shipment and not holding any stock at all is now not possible.  However trying to get back to a normal stock holding position is creating even more demand, and when one market collective tries to step back and ease the pressure another country steps in and the fire keeps burning.  China, India, Australia and Europe are all pursuing the traders for offers and in turn the market keeps rising with this week’s jump in the Coarse Crossbred indicator of 43 NZC being the highest single jump in recent memory.  There is still plenty of room for further upside with current USD prices being a long way from the 2011 peak, but at some point demand will be tarnished by the extreme prices, however as each cycle comes and goes the consumer appreciation and demand for natural fibres and sustainability builds a higher foundation and so the downcycle is probably going to be less severe than in recent times.

 In Australia next week Fremantle has the week off and a national offering is therefore reduced again to only 23,000 bales which seems dramatically low, however in the corresponding week last year the offering was actually only 500 bales more so it could perhaps be considered somewhat normal.  South Africa will sell again next week in their penultimate auction for the season and it appears Lesotho wools will shortly be able to be exported to China again soon adding a further sprinkling of supply to the global market.  New Zealand however skips an auction week again next week so the pressure will remain very tight at the coarse edge of the market.

 The larger combing mills from China were noticeably more active this week in the Australian market and with the meagre offerings in coming weeks their presence will continue to be more noticeable.  Everyone in the trade is expecting the market to continue to be solid if not getting dearer.  The processing calendar still has a few weeks left to run before slowing during as the northern hemisphere summer kicks in, although summer has already well and truly arrive in Europe it seems.  Volatility may show its head again during the Australian spring when the flush of new wool normally arrives, although depending on seasonal conditions the volume of new wools arriving onto the market may be substantially less than in previous years and with a still empty pipeline we may not see a dramatic decline in price.  The forward market is certainly not predicting a crash in prices with good volumes of 19 micron trades going through the Riemann platform less than two dollars below current spot market levels.

 Consumer demand in the second half of the year and into next year is critical for next season’s prices obviously and whilst US/Iran negotiations dominate the market sentiment, a potential agreement doesn’t seem too far off.  US equities have rallied on the positive sentiment to an all-time high and oil prices are back below $100 per barrel but inflation is still lingering which will weigh on consumer activity for discretionary purchases.  Europe is bumbling along without falling off the cliff and processors over there appear to have suddenly found a new lease of life with good top sales overnight.  With Chinese demand not yet satiated and India and Japan still busy activity should remain quite constant through until the end of the current season and with only 25,000 bales per week for the next month it is difficult to foresee anything but a firm market for Australian wool industry in June.