Another solid performance at wool auctions across Australia last week saw the AWEX Eastern Market Indicator rise by 13 cents a kilogram in local currency, decreasing by only US 3c/kg and Euro 10c/kg.
Every category from 16.5 to 32-micron saw green numbers on the market report at the end of the week, except for the carding indicators. Some were unchanged, but the tone was much more positive, especially on the second day of selling.
Medium micron Merino fleece types led the way, with solid gains of up to 50c/kg, whilst some of the superfine types also had a good week despite the European contingent being fairly quiet. Rostered quantities for coming weeks are trending down, and certainly, if the crossbred selection is removed from calculations, there is not a lot of wool for buyers to choose from. This should keep the positive momentum going.
An industry meeting took place last weekend in Jiaxin, China, and the feedback was mixed depending on the segment people were operating in and which product they produced. Wool production statistics from Australia continue to be positive, at least for Merino growers.
Some new or replacement combing machinery is being installed in China, which is a strong vote of confidence for the industry. Carbonising mills, however, are finding business conditions a little tougher by comparison, and some stocks are evident. For woollen spinners with a well-developed and diversified customer base, things are looking very good, but typically those with only a small list of customers are struggling to maintain full production.
Stock levels up until retail for Merino products are very low, mostly due to hesitation on the part of the retailers, but this provides the opportunity for a significant call-up of product along the pipeline if the retail fraternity gets the green light. Understandably, those combing and spinning mills devoted to crossbred wools have been obliged to decrease production this season as that segment continues to drag its feet.
Some in the Chinese industry are getting a little twitchy and beginning to dip a toe in the water, but the vast majority are still waiting for clearer signals that the retail season will swing into gear and their customers will request product.
Waiting for positive signals for the forthcoming season would seem a prudent approach, especially as the economy recovers from its recent woes, but it continues to frustrate those in the early stages of the pipeline who have seen all this happen before. Sooner or later, the wheel will turn, and people will be screaming for deliveries as the mob all tries to push through the gate at the same time - rather than an orderly, sustainable approach.
Nothing new in this phenomenon and typical of sheep behaviour, so we shouldn't be too surprised that these traits are exhibited all along the wool pipeline.
A stronger Euro is certainly beneficial in the short term for European wool processors, but more important will be consumer confidence over the coming months. May will be, in some respects, a make-or-break month for economic stability and recovery in many of wool's major markets.
The longer that wool trades within a tight range, as the medium microns are doing at present, the bigger the bang when they move up.
Europe is looking positive, although a little becalmed at present. It will just be a matter of time before new orders begin to flow. China is hesitant but set to go bang if the consumer conditions allow. The futures market again points towards more positive momentum, with strong gains across the micron range, so May will be an interesting month.
- ELDERS WOOL
