As a mammoth 50,000 bales went up for auction this week, Chinese demand for Australian wool has reached such a major height, rival buyers have created a type of floor in the market.
Even though Indian buyers have stood back as the EMI surges to record new levels, competition among the Chinese buyers themselves is helping keep the market buoyant.
The Chinese interest in the past year has flowed from broader wool into the fine wools, and has helped bring up crossbred and cartings prices as well. And it’s mainly domestic demand in China as aspirational Chinese seek higher quality garments.
Uniform suppliers have also driven the market - one new government department in China resulted in a demand for 500,000 new uniforms, with wool a major part of the apparel order.
Mills and processors have run out of product on the floor in China the demand is so high, according to leading wool exporter, Michell Wool.
Michell Wool chief executive officer, Steven Read, said the result of the strong Chinese interest had created a type of floor in the market.
“China is the big buyer in value and volume,” he said. “Early stage processors have no new wool at all. There is very little raw material around. It’s the same in Europe. It’s a real squeeze. And it’s not as if there is less wool. We have sold 9.7 per cent more wool this year than last year.” Pass-in rates had also dropped dramatically to hover around the 1 per cent mark.
Mr Read said the demand was not for cheaper apparel manufacturers exporting products from China, but the Chinese domestic market, wanting wool in their clothing. “The Chinese domestic market is very strong. It’s the single biggest market for wool in the world. It’s for everything from apparel to textiles to knitwear. Demand to supply corporate wear is also very strong. That corporate and military interest is a large market for wool.”
Australia was the dominant wool producer in the world and could deliver on quality.
Mr Read warned record prices wouldn’t last forever, but he expected there to be more ups than downs in the future.
AWEX market information manager, Lionel Plunkett, said the Chinese buying had created a consistent bottom to the market, and despite a few speed bumps, that interest looked like continuing.
“The issue really is on the supply front,” Mr Plunkett said.
The Chinese were getting into those better types of wool. China now made up for 83.6pc of the sales of wool 19 microns and finer.
Michell reported how strong the market was last week: “All types and descriptions, across the entire Merino spectrum were hotly contested, generally pushing prices up by 40 to 60 cents, with some finer specialty types increasing by over 100 cents”.
“As in recent weeks, wools with favourable length and strength results were the most highly sought after, however, this sale many unfavourable test results were ‘overlooked’ as buyers attempted to secure market share in a rapidly rising market.”
In this season, China has bought 71.8pc of the wool for sale, an increase of 8.3pc for the same time last year.
John Ellicott
journalist and author
journalist and author
