Wool sale year ends with a whimper

By DAMIEN WHITELEY, Elders District Wool Manager
Tasmanian Country
04 Jul 2024


THE wool market dropped 18 cents in local currency, 10 US cents and 8 Euro cents.  

Demand continues to be lacklustre at best and even a small supply struggled to generate any real optimism in the auction room.  

Some overseas buyers obviously thought that they would sit back and see if they could bear the market down, even though nobody is complaining about prices being too high, they still want to get a win it seems.  

Growers responded accordingly by withdrawing and passing in enough wool to stop the rot and the market was more or less unchanged on the second day of selling this week.

The first selling day had seen a decrease in prices of 20 to 30 cents as many of the major players sat back and watched each other to see who would blink first.  

They couldn’t sit on the sidelines for too long, however, with the four-week forecast showing less than 40,000 bales per week in the first couple of weeks in July, compared to 50,000-plus in previous years, and of course the annual three-week recess looming in late July.

Even though early stage processors are slowing down as usual at this time of year, given that they have produced a lot of their orders, and allocated greasy wool against most which are still pending, mill production schedules do not have an end date, so greasy wool for August and September processing must be secured now before the recess.  

Given the dearth of greasy stocks anywhere along the pipeline early-stage processing mills cannot afford to stop buying at least their usual minimum weekly requirement in each of the next four weeks, and most likely a bit more to cover the recess.  

Chinese mills would dearly love someone from another market to fire up and give them some insight into what the new season will be like, as they are struggling to make an informed decision at present and they do not like to be leading the race when the destination is unknown.  

The evolution towards online selling has taken off in China more than many other markets, but this has led to some changes in the supply chain which are proving to be a challenge.  

In previous seasons some of the large retailers and wholesalers in the market would place a large bi-annual order for a few hundred thousand sweaters and that would provide a market signal for price, colour, delivery time as well as micron required, so the early-stage processors and the traders could work from that and extrapolate to other corners of the market as well.  

Now with small bit-players operating over the internet the ordering is much more dispersed and is not providing the market signals as clearly. 

Throw in in some significant shipping challenges for those few export orders still pending at present and life as an early-stage processor in China is not a lot of fun at present.  

The cost of sending a box of wooltop or yarn from Asia to Europe has increased significantly in recent weeks, as well as taking an extra two to three weeks on the scenic route around Africa rather than through the Suez Canal.  

The longer transit times mean that containers are not being returned as quickly as usual, so finding an empty box to put goods into is just as challenging as finding a slot on a ship, and of course the rail costs have risen accordingly as they do.  

Some of the shipping squeeze is attributed to American importers rushing to get products into the States before new tariffs come into force, but the newly imposed tariffs really only affect something like 4 per cent of Chinese goods going to America.  

Others suggest importers in America are rushing to fill their warehouses earlier than normal, perhaps in anticipation of stronger demand, according to Niki Frank, CEO of DHL Global Forwarding Asia Pacific.  

Having the peak shipping season come forward by a full month has caused ocean freight rates to soar, in turn leading to higher pricing on those goods, presumably driving up prices at retail and, therefore, maintaining the sticky inflation that every Reserve Banker around the globe is trying to get rid of.

Across the pond in Europe things are not a lot better.  The Pitti Filati yarn exhibition was held in Florence, Italy and drew a very large attendance from around the world.  

It remains to be seen just how many serious buyers were there, and how many were just tyre kickers, but some attendees report not a lot of positive news, some report some early signs of green shoots beginning to appear, and some report sales into next year as a result of their visits.  

Like all such gatherings, it represents a good opportunity for suppliers to visit clients, manufacturers to showcase what they can deliver for the new season, which is just around the corner now, but mainly focussing on the 2025/26 range, and just a good excuse to have a chat with like-minded individuals.

Japanese officials are seemingly primed to intervene in their currency shortly or alternatively increase the official interest rate to support the Yen.  

China seems to be more comfortable letting their currency decline in value, boosting exports and at the same time they continue to tweak the apartment buying rules to breathe some life back into their property market.  

Elsewhere, Reserve Bankers are stridently pushing back on any market expectations for a cut in rates as most governments seem more determined to throw out sweeteners to constituents for short-term gain rather than focus on the longer-term picture of reducing inflation.  

This is certainly not helping the textile industry as we wait for consumers to pick themselves up off the carpet and tend to their wardrobe again.  

From now until the recess will be a bit like treading water as far as prices are concerned with the real improvement postponed until the 4th quarter unless something remarkable happens.


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