It's time for 19 and 21-micron wools to have their time in the sun

Fine lines play catch-up to the superfine types

Sheep
It was time for 19-21 micron wool values to gather some pace last week, as big auction offerings failed to stifle sales.

It was time for 19-21 micron wool values to gather some pace last week, as big auction offerings failed to stifle sales.

Aa

Values for 19-21 micron wools gathered pace last week, as big auction offerings failed to stifle sales.

Aa

The Australian wool market continues to surprise everyone with its strength.

There was another big selection scheduled for national auctions last week, but only 46,000 bales ended up being put across the rostrum after a few withdrawals.

So, volumes available were below the psychological 50,000-bale barrier for the trade.

Despite the biggest buying fraternity still being on holiday for the Chinese New Year, the wool market started strongly on Tuesday at all three selling centres.

Prices continued to gather steam on Wednesday, before easing off as Melbourne wrapped-up the week calmly - still positive - and, thankfully, out of lockdown.

Overall, the Australian Wool Exchange Eastern Market Indicator (EMI) climbed by 43 cents a kilogram.

The biggest moves were in the 19 to 21-micron categories - for a change.

The superfine types are still being chased hard by buyers - if the specifications are right.

But some of the less desirable traits are starting to appear and be marked down by buyers, which is easing the superfine and medium basis as expected.

Crossbred wools followed their Merino counterparts and finished the week 20c/kg higher.

It was only the carding sector that let the team down with some red numbers on the market report, experiencing a drop of 15c/kg.

Most mills in China are now officially back at work and starting to wind-up production again - although one or two did keep running during the New Year holiday period on a reduced capacity.

This was just to keep workers employed if they did not wish to return home and then go through a two-week quarantine to be able to return to work.

So, the appetite to feed machinery is beginning to grow again - in the early stage production sector.

Perhaps this has been driving the auction activity here in Australia, as well as in South Africa.

Many Chinese operators had expected a dip in auction prices during the holiday period, and would have liked to get their hands on a bit of "cheap" wool.

Too many obviously had the same opinion, and nobody wanted to be left exposed or miss out. So, prices reacted accordingly.

Whether this recent price increase will hold, be corrected or is just the start of something bigger is a topic of conversation in all corners of the wool world.

Chinese domestic demand for wooltops and yarn is slowly ticking-over.

Those spinning and knitting mills operating on a just-in-time basis need to keep buying a little bit each week now that they are operating again.

The Chinese Army uniform order was in the gossip column again this week.

Although it has created a lot of excitement in the trade during the past week or so, there seems to be no confirmation of the order yet - or which micron wool is required, or how many bales of wool will be needed.

Some of the proposals put forward by the purchasing apparatchiks - who are no doubt keen to proceed - have been apparently knocked-back because of the huge cost involved.

Since June or July, when discussions started, wool prices have headed north fairly spectacularly.

So, the rumoured order of 3000 tonnes of 19.5-micron wool - equating to 25,000 bales of 19-micron greasy wool - simply won't fly.

But different fibre blends, with different micron usage, is likely to be pushed out in smaller parcels towards the end of March or April, according to some well-connected industry sources.

Given the buying and shipping activity of the past six weeks has been much stronger than the processing operation has been, a build-up of stock is inevitable.

Some of this is intentional, as people in the trade take a position in the market.

There are those who look at the general price rises of other commodities, such as iron ore, copper, oil and cotton.

They also see the recovery possible when a country gets its COVID-19 levels under control - and the government is prepared to stimulate the economy.

This includes China and, perhaps, one or two other Asian countries - or even Australia, where jobs in every sector (except tourism and entertainment) are supposedly back to pre-pandemic levels.

Perhaps they even glance at the technical charts for wool prices that point to further upside of medium Merino values in the next few weeks - possibly amounting to a couple of dollars - and the futures market, which is willing to purchase at or above spot price well into next season.

So, to not have at least a little bit of stock in the position if you look at these factors in isolation would be negligent.

But for those sitting at their desk and viewing the inventory of worsted fabric, ready-made suits or speaking to their agents in America, Europe or Japan about the dim prospects of selling much in coming weeks, one extra kilogram of stock is too much.

At some point, the COVID-19 pandemic recovery process will reach these countries - and it seems Britain is leading the charge in the vaccination process of those significant wool customer countries.

The question of whether this is soon enough, and consistent enough, to build demand for the autumn-winter season of 2021-22 is on the minds of those holding fabric - and garment stock in particular.

Most in the industry had hoped for a recovery last season, but the second wave of COVID-19 in many places put paid to that.

But with low funding costs, and a significant appreciation in the value of the Renminbi (RMB) currency and supportive government policies, the time to build a bit of stock has never been looked rosier.

So, the early stage wool traders, topmakers and spinners who are building stock in modest amounts only at present maybe correct, or they may get a severe case of indigestion.

Those further up the chain are clearly divided into two camps - woollen knitwear producers in the Chinese domestic market who have had a 'reasonable' time of it; and those in the worsted sector for whom it has been, and still is in many cases, a matter of life and death.

Which camp is correct will be borne-out, not in the next week, but in the next couple of months.

We may see that couple of dollar upside eventuate if things go well - or not.

Aa

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