Banner Image
Trade in Place despite Hiccups

Trade in Place despite Hiccups


Trade in Place despite Hiccups

Article by: Hari Yellina

The Australian wool market remained tranquil last week, despite a week of turbulence. As South Africa re-entered the market, reasonable demand from China, Europe, and India outweighed the effects of increasing supply. The wool buyers regulated their financial flows just enough to keep the wheels working smoothly. According to the Australian Wool Exchange (AWEX) Eastern Market Indicator, Australia’s greasy wool market gained 1% overall (EMI). It finished 4 cents a kilogramme cheaper in US dollars, but Europeans witnessed an increase of 11 Euro cents – though that is hardly their main concern right now.

The resumption of sales in South Africa following a one-week delay to clear part of the wharf backlog resulted in a 2.9 percent increase in pricing. In Australian Dollar terms, this translates to a 40c/kg increase. As is customary, around a quarter of the Cape’s inventory of finer micron Merino wools was certified sustainable, compared to a far smaller percentage of similar wools currently available in Australia. The actual premiums earned for these certified wools continue to be high, both here and in South Africa, as long as the conventional standards are met in terms of staple length and strength, among other things. However, the market for these wools has a limit. Still, if present farming practises allow the farm to become certified as sustainable under one of the existing schemes, a premium of roughly 20-25 percent over “regular” wools is worth pursuing.

Last week’s auction included a strong showing of superfine Merino kinds, as European and Chinese purchasers battled it out for the few remaining high-quality lots. Buyers of this type of wool will have had to manage their purchasing requirements to meet the gap between this week and early July, when they start to reappear, with only one designated superfine sale remaining on the calendar for this season, which is being held this week in Sydney. Furthermore, wools with low vegetable matter (VM) and good yields are in high demand. However, as soon as the yield declines or the VM rises, China’s processing capacity restrictions start to have an impact on prices.

Skirting types, as expected, followed the price action of their respective fleece components, and crossbred wools fared fairly well given the vast – and growing – supply of these, particularly crossbred lamb’s wool, which seemed to be everywhere at the moment. Cardings were a little rough as processors sought to decipher cloudy demand signals at the peak of their processing season. Despite the fact that the first shots were fired in Ukraine after the Australian wool auctions had ended for the week, the anxiety and tension had been building for some time and is clearly influencing the mentality of ordinary Europeans.

Buying and processing wool is still a common practise among individuals working in the early phases of the processing business throughout Europe. However, as the battle continues, wholesalers and retailers will increasingly monitor customer sentiment – or the potential damage to it. The rest of the world and Russia are still doing business. Nevertheless, the costs of doing so are rising rapidly, and the flow of monies into and out of Russia is set to become extremely difficult. Some in the processing industry are concerned about current greasy wool pricing, and they are hesitant to buy too much stock.  However, as price pressure intensifies for China’s lower socioeconomic levels, the cheaper end of the wool wardrobe has lost ground to synthetics and cotton. The Chinese market for wool is maturing – or growing – into a luxury market, similar to other markets across the world.