MORE of the same without the extreme movements of last week in the carding department, so we achieved an expected result in the Australian wool market during the past week.
Just under 40,000 bales were offered, and incredibly nearly 8 per cent of growers had reserves higher than the current near record levels. Perhaps they know something nobody else is aware of, or perhaps they are just getting poor advice from exuberant brokers.
The buying trade searched each catalogue in every selling centre to find enough of the correct specification Merino fleece and skirtings for their processing requirements. In general superfine Merino closed 20-30c higher and medium Merino had a similar result albeit with different centres adjusting to a national price level.
With the poorer wools being discounted, as they should be when buyers are paying for processing performance not just kilos of fibre, and the crossbred and carding segments continuing to ease a bit further, the overall analysis at the end of the week was down 6c to 1738c on the EMI. In US dollar terms it was practically unchanged and the market indicator lost Euro8c.
Incredibly nearly 8 per cent of growers had reserves higher than the current near record levels.
AWEX’s northern market indicator closed down 16c on 1829c. The 17 micron indicator closed on 2705c, 18 micron 2330c, 19 micron 2090c, 20 micron 1901c, 21 micron 1789c, 22 micron 1720, 28 micron 718c and 30 micron 542c.
The headline numbers do little to explain the underlying sentiment of the market at present with starkly differing views for the outlook along the processing chain and across the globe. Pitti Filati was held at the end of January in Italy and although the traditional spring/summer knitting yarn collection contains less wool compared to the traditional autumn/winter show, it is still a very important event for discussions between spinners and their clients.
The current price for all fine raw fibres is of major concern, not just fine Merino, but also alpaca, mohair, yak, baby camel and cashmere. Given the strong movements across the fibre spectrum and the fact that the winter production is still in the processing pipeline with many orders as yet unfinalised prices now have to be recalculated.
Although there is a strong emphasis on renewable and sustainable, and the theme of Pitti was actually RAW, meaning the importance of the raw material, buyers and retailers are struggling to have confidence. If they can pass on the new price levels to an ever more discerning customer demand will remain or even grow, but should the naysayers and bean counters win the argument we will see demand fall, and possibly quickly in the second half of the year.
At present that scenario seems unlikely to affect the greasy wool market in Australia with Chinese and Indian processors making their presence felt every day. With delightfully cold weather across most of Asia at present woollen garments would be walking off the shelves. Most of China is hovering around zero degrees as a maximum and even Hong Kong is in single digit territory for overnight temps.
Adding to this lack of global warmth is the sustained uniform business in China that is keeping worsted fabric production moving. Many state owned enterprises in China have finally shrugged off the austerity, anti corruption spending restraints that have been a hallmark of President Xi’s first five year term and are now gleefully ordering new uniforms. Not only organisations such as police and military, but many others such as customs, banking, railways and the like are ordering new materials – most of which are still pure wool or wool rich blends.
Adding to the Chinese uniform business have been the PyeongChang Winter Olympics in Korea and also the Tokyo Summer Olympic uniforms required to be made from scratch. So there would seem to be plenty of current work in the pipeline to sustain the wool market in the short term, but a large question mark looms for the longer term.
The seemingly infallible Dow Jones index of equity prices in the US has finally sent up a warning flag that maybe prices cannot keep rising at the pace they have been for the past 12 months, with a fall of 4pc last week. Bond yields of 3.5pc are seemingly a much safer bet than 5.5pc from a very toppy share market. Merrill Lynch’s bull-bear indicator, which has an infallible record predicting 11 out the 11 US stock market corrections since 2002, sent out a “sell” signal on Friday. How this translates to consumer confidence, and therefore spending patterns will be something to watch.
Superfine: With the final designated superfine sale for the season fast approaching and around 10pc less wool on offer in February compared to last season there is very little chance that prices will ease in the short term.
Medium Merino: The angst of buyers and processors in the medium sector is probably less than their superfine counterparts, but nevertheless worsted processors outside of China are concerned, less so the knitwear fraternity, but we have seen the carding bubble burst so care needs to taken rather than blind optimism.
Crossbreds: The wheel may be turning with some better demand signals finally emerging.