WEEKLY MARKET REPORT

Week Ending 27^th September, 2013

 AWEX Northern Micron Indices Comparison

PRODIGAL SON LIFTS THE MARKET UPON HIS RETURN!

Two weeks in China and I, with the help of Josh Lamb from Techwool, were successful in overseeing a 55 cent fall in the EMI in the two weeks we were there! No sooner had we cleared customs on Tuesday morning, the market begins a three day rally to claw back half of the past fortnight’s losses, to see the EMI rise by 25 cents to 1097 cents. Yes we were out-gunned in the boat race, but rules seemed to be relaxed from the conference a year ago. The mission to find 12 professional beer drinkers, from a population of 1.4 billion and surgically open their throats paid dividends, although the punters amongst us were disappointed we couldn’t bet on the Chinese teams!

Onto more serious matters, it was pleasing to see the market rebound. The rises were confined to 18.5 and coarser out to 23s, gaining 30 to 70 cents by Thursday. Even with a designated Super-fine sale in Sydney and a good selection of Launceston wool in Melbourne, 18s and finer had a disappointing sale as 17.5 to 18s barely moved in either direction with lots finer than this falling 20 to 40 cents. Only the spinners’ style and better escaped the carnage recording good rises. This sector is still suffering from over-supply and demand from the EU and USA increasing, but still not enough to push the Chinese out of their price comfort zone.

Skirtings had a solid (if not spectacular) sale as all microns and types, regardless of VM or style, regained 10 to 20 cents from their previous losses, with the odd super-fine lot in good demand, commanding a 50 cent premium from last week with one of our lots from Yass making 1005 cents. Unfortunately cardings look to have run out of steam as the MCI fell another 22 cents, now totaling a 62 cent fall over the past three weeks, but still at very good levels for these types. Crossbreds couldn’t cope with the higher exchange rate (91 to 95 in just a week - Sales 11 /12) and lost 10 to 20 cents but are still at good levels.

Now back to China. I saw first hand just how hard wool buyers work when trying to negotiate with the Chinese, having spent two days with Josh Lamb on the road meeting with clients, booking up wool and inspecting purchases at various mills in Dongxiang City, Zhejiang province a few hours south-west of Shanghai. Haggling can come down to a few cents as margins in 1^st and 2^nd stage processing are very tight. Negotiations are done through an “agent/interpreter” who gets paid 2 cents/kg. This equates to ball-park figures of $250 to $300/container. All transactions are done in $US terms and only converted into $A for sale room purposes. Demand for most types is still very strong particularly in ¾ to prem length wools. One mill asked “why can’t we shear sheep every 6 months?”. I replied that some do to get an answer of “not enough”! Josh had a pretty successful day, booking up about 25 containers (2900 bales) on the first day I travelled with him. Techwool dominated the buying list this week buying 15% of the national catalogue. Quantities are slowly shrinking as 44,000 bales are on offer next week. Tip from our “sometimes reliable” source is solid to sellers’ favour.

   Fwd. Price Trades W/E 27 September, 2013

Eastern Market Indicators (AUD cents/kg clean)                              AUD/USD Currency Exchange

1097 cents é 25 cents compared with 20/09/2013                            0.9366 ê 0.0127 compared with 20/09/2013

Northern Market Indicators (AUD cents/kg clean)

1115 cents é 21 cents compared with 20/09/2013