THE overall market as measured by AWEX’s eastern market indicator was unchanged for the week in local currency terms, and down only 4c in US dollar terms, which was most people were expecting and wanting to happen.
However, the segmentation of the wool market continues and there were marked differences in the performance of the different micron categories.
Superfine Merino fleece, now in short supply and containing only a few high quality lots, continued to climb with the 16.5 micron MPG gaining more than a dollar for the week. Buyers were frantically chasing the few good quality lots on offer and prices for these tended to be extreme. Lower quality lots still fetched good prices, but buyers are certainly more and more discerning at these price levels.
The movement for 17 and 18-micron wools was less extreme, but still positive. Medium Merino fleece types closed down slightly for the week with the high VM, lower style lots being discounted compared to the easier processing, higher yielding types. Crossbred wools eased slightly as did carding wools.
AWEX’s northern market indicator closed up 5c on 1641c. The 17 micron indicator closed on 2411c, 18 micron 2242c, 19 micron 1945c, 20 micron 1620c, 21 micron 1484c, 22 micron 1401c, 28 micron 745c, and 30 micron 575c. AWEX’s indicative bales are 17 micron $2781, 19 micron $1762, 21 micron $1639 and 28 micron $876.
Most buyers and customers overseas are concerned about the strength of the superfine market, and it is only those with stock on hand that can average their prices and continue to operate. The majority of processors now have little, or no stock to allow this however and so the chorus of those asking for the superfine market to steady is becoming louder.
At the end of the day the market will be driven by supply and demand, and there is obviously less supply available of quality superfine wool at this time of year, and still some orders that need to be filled. The medium merino market, as well as the general knitwear sector of skirting types and cardings which together represent the bulk of the Australian wool clip has steadied and it is really only the superfine area that continues to make headlines, so perhaps there is no need for panic – unless you happen to be one of those processors with uncovered orders of 16 micron wool.
There is a differentiation within the market based on the type of product being made, as well as the obvious segmentation based on the micron of the wool purchased. The traditional worsted fabric producers, making material for predominantly men’s suiting are struggling to pass on price increases this season. Conversely the newer products in the active wear segment and the like, are less price sensitive and appear to be able to absorb these current price levels.
While the new products are great, and probably taking wool to more new consumers than ever before, the industry cannot afford to ignore the mainstream consumers and processors who have supported the industry for the last century. This presents an interesting conundrum going forward of how to support the foundation members, but at the same time encourage innovation and new market participants. Perhaps some of the traditional consumers of wool, where price is always an issue, and these sectors inevitably lead to the boom and bust cycle of greasy wool prices, will become extinct.
School uniform is one of these traditional products that have historically consumed a lot of wool, but at current price levels, manufacturers are increasingly turning to cheaper alternative fibres, and will perhaps abandon wool altogether. There are many other examples, and even those consumers who are searching for a “cheap” woollen garment will inevitably be disappointed unless they are able to calculate the “value” of purchasing a woollen garment.
Pleasingly for the consumer on the street (admittedly the high street for wool) the global economic environment continues to look promising. A recent report form HSBC titled Global Economics Quarterly highlighted the synchronised global upturn, which is currently underway. Whilst most of the current optimism relates to the US and China, they point out that even the likes of Brazil and Russia are moving in a positive direction and improvements are now evident in European industry.
A bit like the wool market, the US stock market has finally broken its 109-day streak during the week as investors raised concerns about whether President Donald Trump will be able to deliver promised tax cuts. However, some of the more outlandish promises will take time to morph into sustainable or realistic policies that can be achieved at a political level. Overall, the sky has certainly not fallen-in as some predicted back in November, nor would it seem, is Europe going to be taken over by populist governments. The outlook appears to be relatively stable, so this should sustain consumer confidence and this will have a large bearing on the wool market in coming months.
Superfine: Low supply may continue to push the indicators higher incoming weeks, but a stabilisation is overdue and expected.
Medium Merino: The market has behaved rationally, pausing at the ceiling whilst the trade becomes accustomed to price levels leaving room for another push higher post Easter when quantities ease.
Crossbreds: Stock levels continue to haunt this segment of the market, but prices have stopped falling and product is moving again.