Wool Report - A kind of hush but hints of better times

SYDNEY and Melbourne were the only two wool auctions in the world last week as low supply and seasonal shutdowns meant every other marketplace around the globe was closed.

There was a smattering of private treaty business in both Uruguay and Argentina but volumes were negligible really as is normal at this time of the year.

The Chinese clip and some European clips are being harvested but the wools are yet to reach selling centres. 

The wool trade tried to keep things measured and controlled lest such a small offering get out of hand as we are seeing to a degree in the lamb market over the past couple of weeks.

All indicators were positive and prices finished higher without any extremes.

The AWEX EMI rose by 10 cents in local currency terms, and 6 cents in USD and also in Euro terms.

A smattering of European spec types on offer this week and the RWS-certified clips sold very well, particularly the latter with no Cape selection available.

Apart from a realignment in the Sydney 19.5 MPG, all the other segments finished better off for the week, although nothing was extreme as buyers trod very carefully in such a small selection.

The competition was widespread but still dominated by the larger topmakers who need to maintain buying volumes ahead of the looming winter recess.

New business for the exporters in Australia is difficult to come by with stock hard to find and cautious selling the most prudent move when supply is so tight.

Crossbred wools continue to be relatively easy to sell, but hard to buy in any quantity and so many exporters prefer not to try to offer these types.

Chinese traders are increasingly concerned about the lack of 21.0 and 22.5 micron wool available as these form the backbone of their bread and butter types for both weaving and also knitting.

Some in the trade have moved finer this year given the constricted premium this season, but changing the micron used for a particular product is not really that simple given performance, handle and continuity.

The difficult decision making environment all along the buying, trading and processing pipeline continues, and the consumer is likewise still facing difficulties when making a decision given the unrest around the world.

But it is not all doom and gloom out there, despite what the media would have us believe at the moment.

Figures released from China this week show that retail sales for May were up by 6.4 per cent, sharply ahead of analysts’ expectations who were punting on 5 per cent growth according to a report by CNBC.

Growth in industrial output slowed slightly to 5.8 per cent in May while year-to-date fixed-asset investment was more sluggish at 3.7 per cent.

Urban unemployment for May came in at 5 per cent, the lowest level since November last year.

So people are shopping more, industrial activity presumably slowing after the front loading to beat the tariffs, apartment building still sluggish and perhaps employment prospects are looking a little better in the Middle Kingdom these days.

Although Beijing is still very reticent to throw too much stimulus around, their trade-in scheme for white goods has paid dividends over the past few months as consumers purchased a profuse number of new appliances.

The online sales event called ‘618’ (18th day of the sixth month) has just ended.

Originally created back in 2004 by the second-largest online selling platform JD Com to counter rival Taobao’s Singles Day it has morphed from a one-day event into a much longer affair as these things do.

Beginning on May 13 this year and running until June 18 the month-long sales festival increased turnover compared to last year, albeit by adding an extra week.

With exports from China under pressure, Beijing is putting more emphasis on domestic consumption again to shore up the economy.

Smart phones and AI-powered laptops were in huge demand, but also home appliances, apparel and beauty and skincare products, particularly among China’s Generation Z shoppers according to JD Com.

Tmall, Alibaba’s business-to-customer platform reported that turnover of home appliances, mobile phones and digital products participating in trade-in programmes increased 283 per cent compared with last year’s Singles Day shopping extravaganza – a trade-in program for apparel would also be good next time.

So, while there is no big splash stimulus coming from Beijing, the consumer activity is moving in a positive direction and if the unemployment numbers are real it would go a long way to creating a positive change.

In Europe the stop-start nature continues with production mills seemingly trying to get back on track but then hunkering down again as caution prevails.

The infrastructure spending package from Germany and slowly improving economic signs will soon have an impact, but so too will the pending summer holiday period when many mills will close for a month.

Other textile operations around the world are cautiously turning the wheels and desperately hoping the Middle East situation does not get out of control.

This week sees a larger volume of greasy wool on offer in Australia with 32,000 bales in three centres, but it will also allow early stage processors to flex their muscles a little more and build stocks prior to the recess.

 With the exception of 21-micron, the futures market remains very well bid at current spot levels for the new season highlighting the solid floor in the market.