WEEKLY MARKET REPORT

Week Ending 5th February, 2021

 AWEX Northern Micron Indices Comparison

IT’S A BILLION DOLLAR INDUSTRY- OFFICIALLY!

This time last week there was some nervousness about whether the market could hold its ground after a decade long record lift of 134 cents. Fremantle’s close last Thursday saw most categories cheaper and we all thought that we could see a retreat of 30-40 cents. Fortunately this was not to be although there was some softness in patches but we look at 45,126 bales being offered which was over 5000 bales more than the previous week and one can feel reasonably happy with the slight adjustment.

This week gross sales of the Australian wool clip passed the 1 billion dollar mark which it has done every year for quite some time. This year it has taken five weeks longer to reach the milestone than last year which, when all is taken into account, is not such a bad result compared to what might have been when we were looking at the sub 1000 EMI last Spring. Hopefully we can report the 2 billion dollar mark before the end of June.

The export destination figures tell the true story of who is almost singlehandedly pushing this market along. YTD China has purchased 86% of our wool but trade sources of recent weeks say the figure is higher and over 90%. Many are asking should we be nervous about this kind of domination. The simple answer lay in the fact that the other competing destinations are simply not buying and without China who knows where this market may be? Information out of Europe has downstream processors showing year-on-year trading results down between 30% and 65% so orders are just not being placed whilst they trade out of their stock positions. Meanwhile China’s economy which faltered momentarily has rebounded on the back of strong domestic sales, particularly in the prestige apparel end. Wealthy Chinese shoppers are forced to shop at home with borders closed hence a big jump in high end fashion sales domestically. Wool has managed to avoid any of the geopolitical tensions that have affected other commodities. Wool is one of the longest traded commodities with China going back to the beginning of China’s more recent emerging affluence. Wool is a product that has a lot of value adding in China and the textile industry rates second in terms of contribution to GDP. The other helpful factor is that there are many strong, long standing relationships between the Chinese mill operators and the Australian wool industry. These relationships become critical when there is some turbulence about.

A quick glance at the above table far right sees that the gap YOY has completely closed sub 17 micron. In fact they are worth more now than 12 months ago. The 18 & 19 micron sectors are looking a lot better as well but I would be cautious just yet that the medium categories can close the gap too much in the short term. Seasonally we are beginning to see clips over a micron broader than last year so it’s easy to see where there will be some pressure on fine wool coming out of drought. I would not be as hopeful for wool above 19 micron as current production is quite plentiful.

A larger offering again next week will test the market with 52,822 bales being offered. Macwool/Carmichael will offer 1235 bales on Tuesday. Early mail suggests maybe a firm trend.

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Main Buyers (This Week)