Wool market on an upward trajectory

MOST wool industry pundits had expected a strong showing with stocks further running down at processing mills and supplies of fresh greasy wool dwindling. The AWEX EMI jumped out of the blocks on Tuesday rising by 24 cents and then added a further 15 cents at Wednesday’s sale, giving it a total rise of 39 cents for the week. In USD terms the increase was even more significant with a rise of 68 US cents. For the European customers the increase was 38 cents but Chinese customers saw an increase of nearly 4 yuan per kilo which in percentage terms at 4.6% was double the increase in AUD terms, such are the vagaries of the currency market.

With no sale in South Africa this week the Australian auction was the only place for buyers to quench their thirst for raw material and there was a further heart skipping moment when an outbreak of Scrapie was detected in Argentina. Three sheep imported from Paraguay were believed to have been the source of the outbreak. Initially all wool exports were banned creating quite a bit of angst for both exporters and their clients in China who have been hoovering up any and all quantities of Argy greasy wool this season for processing in China. Following some tense discussions and then clear thinking the ban on greasy wool exports was rescinded and a very large sigh of relief went through the offices of exporters and topmakers. Meat exports from Argentina will still be affected until the outbreak is contained but for wool it is now business as usual although like Australia production is decreasing and the season is fast drawing to a close in South America as winter approaches.

Whilst everyone is still concerned about the supply of greasy wool over the next couple of months Chinese domestic demand and that of other Asian countries seems to be sustaining the market quite well. Topmakers are able to sell reasonable quantities providing that they can use some older stocks to make an average price and shield their customers from the full extent of the recent price increase. That is not to say that their customers are accepting of the price rise, but the domestic season in China is in full swing and goods need to be produced and stocked on the shelves. The Chinese economy is growing with recent data showing that the country’s gross domestic product grew by 1.3% in the March quarter from the last three months of 2025 according to a New York Times article. If this pace continues through the year the Chinese economy will expand at an annual rate of about 5.3%. A long, steep slide in apartment prices has eroded China’s household savings, prompting many people to cut spending, which is obviously making it tough for garment retailers.

Yet the sheer size of the consumer market in China, and indeed Asia means that a lot of garments are still being consumed or will be so the manufacturers are mostly running at full tilt. Quite a bit of creativity is required to meet the price point required by some of the large retailers such as Uniqlo but smarter, more technical knitting machines can now produce lighter weight garments at a more efficient rate helping to lower production costs and ultimately the shelf price despite the surging raw material cost. Asia still represents around 60% of the world’s population and wool consumption in many of these countries is increasing. Retail sales in China rose by just 2.4% in the first quarter but the government there is still powering ahead with infrastructure projects to keep people employed and the wheels turning so hopefully all these garments now being produced will find new owners in the coming season.

Europe is still bumbling along trying to find a way to fire up its collective economy with limited success. The massive infrastructure and defence spending boost from the German government will eventually pay dividends, but as in all developed economies the cost of wages and therefore production still exceeds that of Asia. News this week that the Benetton Group will further restructure its operations and close more of its production facilities, which are mostly in Eastern Europe but also some in Italy, has sent a shudder through the early stage processors who previously supplied wooltop and carbonised or scoured wool to this textile Goliath. Asian garment makers will benefit by supplying finished products to the company but it is obviously a blow to the beleaguered European textile fraternity.

Whilst the Ukraine situation seems to be getting worse if anything and still proving a drag on economics and morale in Europe the saga in the Middle East does appear to be moving towards some sort of resolution which will be a very positive development when it does get sorted. Oil restrictions appear set to continue for some time though and there are lots of manufacturers feeling the cost increases from plastics and other petrochemical derived products.

The wool market will no doubt be strong again next week despite the increasing Aussie Dollar which is approaching the .7200 resistance level, but the global currency traders appear less enthused with the Greenback than they usually are. South Africa resume selling again which will add to supply, but Sydney will only have a one-day sale next week as the Australian total offering drops to just over 32,000 bales and New Zealand takes a week off as quantities over there dry up as usual at this time of year. The buyer’s appetite for wool doesn’t seem to be satiated yet with Fremantle finishing the week very strongly and some exporters withholding offers to their Chinese clients until they have the chance to replenish stocks so a further price increase next week seems inevitable.