Big fleece price fall falters

Big fleece price fall falters | Wool Wrap

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In a week of new records, the Eastern Market Indicator closed up by a whopping 170 cents a kilogram.

In a week of new records, the Eastern Market Indicator closed up by a whopping 170 cents a kilogram.

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From the first bounce last week, the auction market kicked with the wind in Sydney and Melbourne with huge increases in price for virtually every type of wool.

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JUST a bit more than a "dead cat bounce" last week, after the previous savage falls meant the wool market leapt out of the blocks on Wednesday morning in Sydney and Melbourne sales.

Following on from the better tone towards the end of the previous week, sales staff kicked into overdrive on the weekend in China and across the globe as demand for greasy, wooltops and yarn began to appear.

Most early stage processors had slammed the bag by Monday afternoon last week, not wanting to risk selling too much.

It would appear that some had indeed sold a little more than that, and buyers were obviously given instructions to get in quick to fill orders.

From the first bounce, the auction market kicked with the wind in Sydney and Melbourne with huge increases in price for virtually every type of wool.

Fremantle followed the tone by adding more than 200 cents a kilogram to the price of medium Merino fleece as a meagre 1250 odd bales was all that was available in that centre.

At the end of a frenetic day 130c/kg had been added to the Eastern Market Indicator price in a single day's trading.

Wednesday evening around the globe saw WeChat go into overdrive as the Australian exporters and Chinese buyers scrambled to make sense of the day's events, and work out a strategy for the next day.

Further business was still being concluded into China as mills sought to cover sales made and perhaps try and get ahead of the curve.

Most were content to sit back and watch the fireworks however.

With only Melbourne and Fremantle taking the field last Thursday and only 12,000 bales between them, the market again shot up.

Medium Merino fleece added another dollar in Melbourne, while Fremantle was a little more circumspect with rises generally limited to about 50c/kg.

In a week of new records, the EMI closed up by a whopping 170c/kg, US125c/kg, and 115 Euro cents.

This was a long overdue correction after the continual falls in August, and one which had been expected, but in the space of a couple of weeks or a month, not in just two days.

The optimists expecting the uptrend to continue when auctions resume again will probably be slightly disappointed.

With the usual tell-tale signs of Fremantle closing at lower levels than the east coast, and South Africa who have resumed auctions again, also quoting slightly lower levels than the Melbourne close, most are predicting a settling down to the levels of Wednesday in the short term.

The inevitable wool market volatility could surprise, especially given the Nanjing Wool Market conference coming up in Shandong on September 20.

Wool sellers and buyers from around the globe will get together and analyse the year past, and try to make sense of what the next season may bring.

Often before this annual event the market is firm as Australian exporters take a bit of stock to sell at the conference, or in some years the market has a flurry just after the conference when exporters have sold a large quantity.

Given the torching some have had in the last week, business is likely to be more restrained and cautious.

There will be plenty of soul searching and analysis of the current demand situation no doubt.

With more positive and conciliatory signals coming out of both Beijing and Washington around the tariff issue there is cause for some optimism in that space.

Recent data shows that despite Donald Trump flogging the Federal Reserve to reduce interest rates, the US economy is faring remarkably well.

The European Central Bank is trying to follow suit, with a 10-basis point reduction in interest rates, to negative 0.5 per cent, and announcing a bond buying program - otherwise known as quantitative easing or money printing.

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