WEEKLY MARKET REPORT 

Week Ending 20th March, 2020

 AWEX Northern Micron Indices Comparison

MARKET CAUGHT UP IN COMMODITY PLUNGES!

Stability was the last thing on buyers’ minds as the market plunged this week amid the chaos that Covid-19 is creating globally. After last series’ falls the market accelerated the losses this sale as the AWEX EMI collapsed by 83 cents to 1438 - its lowest point since September and 27% cheaper than 12 months ago. The fall was more severe in US$ terms (181 cents to 801, 18% for the week and 43% lower than last year) as the FRX dropped like a stone to 55 cents. All MPGs recorded losses of 100+ cents (110 to 140) with the discounts for the inferior types still becoming larger and larger. Skirtings had a similar scenario peeling off by about 100 cents while merino cardings gave up 30 to 90 cents as the MCI fell by 50 cents 1004. Prices are still at reasonable levels for this sector but, as  an indication of just how high these types have been, the MCI is at a percentile ranking of just 7% for the past 5 years meaning it’s been higher 93% of that time. Crossbreds were the best performing of all sectors as 26s and finer lost 30 cents while all others were either side of firm.

It looks as though the wool market is catching up to other commodities and global stock markets as far as falls are concerned as the world slips into certain recession. The EMI has lost 146 cents over the past 3 sales but still far less than oil, iron ore or stock markets and currencies. Just 2 weeks ago the AU$ against the US$ was 66 cents. Today it’s lifted to 57 from 55 last night. Normally such a dramatic fall in the FRX would convert into business being done and a rush to buy wool at the new favourable FRX - but not now. The big depreciation of the AU$, 13%, has masked the heavy price losses of wool in real terms. Over 70% of wool is traded in foreign currencies all of which have appreciated by 10 to 14%, the wool market falling by 10% over the past 4 sales.

Chinese top-makers and exporters to China dominated the market as European interest was almost non-existent except for the odd specialist superfine order. Schneider reported that their mill in Italy is still in full operation despite the epicentre of the virus that has spread throughout Europe starting in that region of Italy. Despite the falling market Chinese interest remains strong as most factories have returned to normal production. The dearer market in Fremantle yesterday gives hope that the market might be able to level out next week.

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WEEKLY MARKET REPORT 

Week Ending 13th March, 2020

 AWEX Northern Micron Indices Comparison

COVID-19 TAKES HOLD!

Ever since the Covid-19 outbreak started everyone in the wool trade had an opinion on the effect, when it would make an impact and how long the aftershock would last. The year, to date, has certainly been eventful with big price swings in the market, an extended Chinese New Year due to the start of Covid-19 and all the associated drama with it and a cyber attack on the trade’s software provider that put a stop to wool sales for 1 week. Through February the market actually improved marginally to everyone’s surprise with most pundits tipping a downturn in demand for textiles and a vast array of consumer goods as people’s spending habits slow to a crawl. Governments across the globe are rolling out spending stimulus packages to try to avert what some economists are already resigned to - a global recession.

The AWEX EMI had been trading in a narrow band of 1548 to 1584 last month but showfloor chatter was increasingly becoming negative as all other commodities’ prices have fallen sharply and stock markets around the world have taken their biggest hammering since Black Friday in 1987. The opening day of this weeks wool sale saw heavy losses as merino fleece types were wound back by 40 to 75 cents, less for the better style lots with some types < 65% yield attracting a premium and discounts still increasing for wools below 55% yield. Melbourne did stage a late recovery in the opening session which saw the market just cheaper on the final day. 17 to 18 micron fell by 85 cents for the week while 16.5s and 18.5 and coarser retreated by 40 to 65 cents. Skirtings fell by 50 to 60 cents, while merino cardings gave up 20 to 45 cents from the previous series’ levels. Crossbreds looked to be the only sector to have escaped the big falls of the merino selection with all types bar 25/26 micron (-20) to finish on par.

It seems as though Covid-19 is affecting the globe in nearly all aspects of life.  A plethora of sporting events and competitions have been delayed or cancelled as well as restricting the public from gathering in large numbers to try and restrict the spread of the virus.  The wool market has been relatively untouched up until now but could be swept up in the economic turmoil that has engulfed the world. We must remember that the market is still in a very healthy price range but ill winds are blowing and, given circumstances around the globe, most are predicting a cheapening trend well before any sort of recovery starts which now looks a long way off - well into the second half of the year or beyond. Next sale has 50,000 bales on offer as Melbourne still has some wool to clear from the sale that was cancelled last week. Here’s hoping for some sort of stability.

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 WEEKLY MARKET REPORT 

Week Ending 6th March, 2020

 AWEX Northern Micron Indices Comparison

WOOL SALES RESUME ON A SOFTER NOTE

Wool sales recommenced this week as most participants reported that essential components of the software programme were up and running enough to conduct the wool sale. The elevated offering of 69,000 bales didn’t eventuate; the total selection came to 62,000 bales (the largest weekly offering for 12 years) of which 24% was passed-in, most of that in the last session. The opening day actually saw modest increases on the Eastern seaboard but a bit cheaper in Fremantle but, by late on the final day, the extra quantity and big volumes of poorer style types was too much for the trade to absorb as the market tailed off. Losses ranged from 5 to 20 cents for all merino fleece microns with discounts for inferior types becoming larger - another 50 to 100 cents off.

Skirtings followed the merino fleece price direction - dearer for the better types in the opening session only to fall away late on the final day to finish 10 to 30 cents lower. Locks were the only type to lose ground in the carding sector (20 to 30 cents back) while crossbreds withstood most of the negative tone in the merino sector to finish the week 5/10 cents off.

The scenario of pushing 2 weeks of wool sales into one wasn’t ideal but, under the circumstances, the trade was left with no alternative. The higher volume, the quality of the offering and the FRX that favoured the US$ by 1% after it hit its lowest point since the GFC last week was always going to put the market under pressure. It was only early last week before the cyber attack on Talman that showfloor chatter had the market adding to its values but now uncertainty is commonplace as to where the market might be headed as Covid-19 spreads to Europe and other parts of the globe but good news may be coming from China as the number of deaths and reported cases has been on the decrease over the past 48 hours. Global economic growth will be stymied in the March and June quarters as panic on stock markets this week had investors running for cover as the big sell-off came amid fears of a global recession caused by Covid-19 which will curb consumer spending dramatically sending demand for a vast array of goods (including woollen clothing and products) lower. Quantities next week drop to a more manageable 46,000 bales as Melbourne is the only centre to have a bit of a backlog of wool from the last 2 weeks. We hold our breath that financial stress for buyers is over and letters of credit keep flowing in and demand holds. If anyone has any agistment available could they please contact Luke or Don. Despite the widespread rain we still have clients in need of water and are still feeding their stock.

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WEEKLY MARKET REPORT 

Week Ending 14th February, 2020

 AWEX Northern Micron Indices Comparison

MARKET JUST HANGS IN

As expected, Coronavirus and its impact in China are still dominating the news and the flow-on effects for the global economy. It’s a given that economic growth will slow around the world but by how much and for what length of time is impossible to pinpoint, anywhere from 0.5 to 1.5% less growth forecast. The general consensus is this will last for the next 2 quarters at least. The economic slowdown in China is already taking effect as travel restrictions and a slow return to work for most of the population, is massively impacting consumer spending from food to electronics and clothing. The only factories allowed to resume operations thus far are those producing commodities that prevent the contagion, about 10%. It’s hoped another 30% of factories will start work this Monday and most others on 24th February. In regards to wool, port logistics in China are saying there should only be a one week delay for wool to reach its final destination, but this could stretch out to 2/3 weeks depending on availability of containers going back to China. The Chinese government is making an all-out effort to quell the spread of the virus. The big cities have set up screening stations at their entry points and airports and railway stations, with factories not allowed to have any workers on site from quarantined provinces. Many workers if possible are working from home.

The market’s reaction was minimal this week as the AWEX EMI lost just 9 cents to 1568 and 11 cents to 1054 in US$ terms. Fine merino fleece microns <18.5 lost 15 to 40 cents due mainly to a style adjustment from the superfine selection offered in the previous series. 19s and broader were in sellers favour. Skirtings had a worse sale than their fleece counter-parts giving up 40 to 60 cents while all types in the carding sector bar LKS fell by 20 to 30 cents. Crossbreds were the only shining light as increases ranged from 15 to 35 cents.

Europe was again the dominant buyer as China deals with the Coronavirus and many mills still not back into full production. The large capital expenditure of the major buyers has surprisingly been maintained over the past 3 weeks. If shipments are significantly delayed, the cash reserves of buyers will be tested in the short term. Another problem will be sourcing containers to fill with wool on ships returning to China. The lack of ships and containers arriving from China has dramatically fallen over the past 3 weeks which means the quick turnaround for their imports and our exports back to China has gone as has the “backload discount” the shipping companies offered to ensure full containers on the return leg. This now could be a thing of the past as a shortage of container space could escalate shipping prices. Market direction next week is any-ones guess.

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WEEKLY MARKET REPORT 

Week Ending 7th February, 2020

 AWEX Northern Micron Indices Comparison

BUYERS STARE DOWN CORONAVIRUS

The expected falls due to uncertainty over the Coronavirus issue this week didn’t materialise as buyers led by Chinese interests continued unabated. Despite what seems to be an escalating problem with the virus combined with the extension of the Chinese New Year to keep people at home, the start of sales on Wednesday’s market was on firm footings and gathered more momentum on the second day of sales.

There were several industry huddles late last week among trade bodies who discussed options from suspending sales to continuing as normal and maybe with some support from brokers to extend payment terms to allow cash strapped buyers to continue operating. The lockdown in China has meant that no-one is at work to process invoices hence buyers here in Australia are carrying the cost of delayed terms. With $43.35m sold this week it won’t take long to chew up available finance resources, so the extension of payment by even a week allows breathing space until things sort themselves out. Macwool was one of the first brokers to extend payment and free storage to 14 days, which was well received by buyers and, as the week progressed, a further six or seven brokers followed suit.

The positive tone was not universal however as the micron indices show above. Whilst the low vm, better style wools all showed healthy gains this wasn’t the case for the large quantity of low yielding, sub 50% fleece types which struggled to maintain values. There is about 23% of the catalogue not purchased by China but these low yielding, drought effected wools are certainly reliant on Chinese competition, hence our willingness to extend payment terms on behalf of growers to maintain their support.

We have advised buyers we will offer this extension for four selling weeks then review the situation.

In regards to the market, momentum built as the sale progressed to peak as the last lots were sold in each centre. The AWEX EMI added 29 cents to 1577 and 22 cents in US$ to 1065. All microns posted gains of 30 to 60 cents with the larger volume of superior style, finer types in this designated superfine sale in Sydney, where premiums were 150 to 200 cents higher but, as mentioned above, the lots yielding below 50% looked 200/250 cents off the pace. The situation was better for merino skirtings, < 17 micron jumped by 50 to 70 cents with all others 20/30 higher. Cardings were also positive finishing in sellers’ favour. Crossbreds also benefitted from the renewed competition to add up to 20 cents to their previous sale’s prices. Next week has 43,000 bales on offer. Hopefully the people we need to be back at work in China are allowed to work and some form of normality can be restored there. It’s been a crazy few weeks!!

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 WEEKLY MARKET REPORT 

Week Ending 31st January, 2020

 AWEX Northern Micron Indices Comparison

WHERE TO NOW? WHO KNOWS??

The wild volatility continued this sale just as the market has done since the New Year’s resumption and indeed a pattern that started last August. Sure there are always outside factors that can influence the market but we seem to be in a perfect storm of new causes that is sending the market on the roller-coaster ride we are on at the moment. The Coronavirus and extension of the Chinese New Year till the 8^th February and a liquidity problem due to banks in China on holidays has hindered normal buying patterns as everyone second guesses what the market might do and virtually no-one has been able to make a firm prediction. There will be a definite effect on the global economy as economic growth slows and consumer confidence will worsen before it improves. 

The market opened, as all expected, with heavy losses across all microns as the opening day’s 56 cent loss for the AWEX EMI was the largest daily fall since August. The market staged a recovery in the final session - exactly half the losses (28 cents) clawed back. By week’s end the EMI had lost 28 cents to 1548, 38 cents in US$ terms to 1043. Losses ranged from 45 to 25 cents for all microns bar 19/19.5 that retreated by only 5 to 15 cents. The better style spec types were, in some cases, sold with virtually no discounts but, at the other end of the scale, the average and inferior style types (MF6 & MF7) were up to 200 cents cheaper than the previous sale. Skirtings suffered heavier losses, 70 to 90 cents for 17 micron and finer, 90 to 120 cents for all others and up to 140 cents for poorer style lots. Cardings couldn’t maintain the gains of the 2 previous sales as falls of 20 to 40 cents covered all wool in this sector. Crossbreds also fell out of favour as 26 to 32 micron fell 30 to 40 cents.

Global stock markets reacted quickly to the growing concern of the Coronavirus but did recover most of the losses later in the week. The domestic travel restrictions in China and their extended Lunar New Year celebrations have hampered some mills’ operations that rely on itinerant workers that have gone back to their home provinces and are unable to return to work. Orders were virtually non-existent on the first day but order was restored in the final session as sanity prevailed as FRX against the US$ fell by 1.25 to 1.86% giving manufacturers buying in US$ a cheaper buy rate thus pushing the market higher in the final session. Also helping was the high pass-in rate (37%) on the first day and 13% (5920 bales) withdrawn for the week.

A pleasing aspect was the dominance of the world’s largest top-maker from Europe for Merino types with traders very active and indent buyers from China making their presence felt in the final session. So where to from here is anyone’s guess. To predict a price movement direction would be a brave move but hopefully the recovering market is a sign of things to come as national quantities should be around 40,000 bales per week for the next month.

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 WEEKLY MARKET REPORT 

Week Ending 24th January, 2020

 AWEX Northern Micron Indices Comparison

HIGHER VOLUME STRETCHES MARKET

The market opening felt the pain of the increased volume of bales in the Australian wool market this week. After last Tuesday’s increases between 100 and 120 cents, this week’s offering jumped from earlier predictions of 49350 bales to 59900 bales. With this came discounts from the start as buyers struggled to find the finance for sudden increased volumes of wool.  A three day sale in Melbourne saw them open up, selling on their own, on Tuesday. The softer tone was evident when selling began in the merino sector. The individual Micron Price Guides (MPGs) for 17.0 micron and coarser falling by 14 to 40 cents by day’s end.

As Sydney did not sell last Thursday or Tuesday this week, everything was pointing in one direction for when our market opened Wednesday. Fremantle was in the same boat and both centres were pulled back to match Melbourne’s levels. Freemantle dropped between 9 and 31 cents, not as great a drop as Sydney due to Freemantle selling last Thursday and taking some of the losses then. Sydney, however, dropped between 37 and 110 cents of which 19 micron and broader took the biggest brunt of the losses losing between 98 and 110 cents respectively. These drops, compared to the previous Tuesday’s sale, meant that a lot of wool was pulled out of the market ending in a week where the offering ended up being 52,666 bales of which 15.9% was passed in, continuing at historically higher than normal rates. Thursday seemed to find a consolidated level across all three centres as buyers seemed to be happy with securing as much wool at these levels as they could. By the end of Thursday’s selling period the market seemed to be a bit more positive. All wool types were very firm to 10c dearer with most attention drawn back to the merino fleece sector of 19 micron and broader.

The AWEX Eastern Market Indicator (EMI) lost 33c or 2% this week to move to 1576c clean/kg. The EMI in US Dollars (USD) was lower again as the 0.6% lower exchange rate helped depreciate that indicator by 2.6%. The USD EMI adjusted down to a 1082c US clean/kg close for the week which was a 29 USC loss. Even with these drops the EMI is still 18c clean/kg ahead of the last sale before Christmas - still very good levels. Merino Skirtings had strong support all week ending the week fully firm to 20 cents dearer across all microns. The oddment sector defied the trend of all other sectors. Locks in particular were well sort after pushing prices up by 30 to 40 cents. The crossbred sector took a fair hit this week as well as they seemed to be out of favour with the buyers all together losing between 21 and 84 cents.

Next week sees another 40680 bales go under the hammer. As Monday is a public holiday there will only be two selling days, Wednesday and Thursday. Also China will celebrate their lunar New Year and will pretty much be shut for the week so it will be very interesting to see how our Australian Wool Market performs. Fingers crossed, firm to dearer!

HAPPY AUSTRALIA DAY and safe travels to anyone travelling!

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 WEEKLY MARKET REPORT 

Week Ending 17th January, 2020

 AWEX Northern Micron Indices Comparison

NEW YEAR BUT SAME RESULT!

As has been the case for a number of years now the market started the new year with a bang. After last week’s 5% rise in the South African market talk on the showfloor was of a similar scenario. The chatter was spot on as all merino microns added 100 to 120 cents on Tuesday on the Eastern Seaboard. On Wednesday, as Fremantle came on line, Sydney was a fraction cheaper (10 cents) Melbourne mixed and after an explosive start Fremantle could only add 30/40 cents to their pre-Christmas values as talk of a correction was common. The big downward price adjustment came on Thursday with Sydney not selling with the other 2 centres as all microns lost 25 to 100 cents. After the wild fluctuations the AWEX EMI did post a 51 cent rise to 1609.

Skirtings also benefitted from the initial jump in the market to have this sector 70/90 cents to the good with cardings ranging from 40 to 70 cents higher. The crossbred sector couldn’t go with their merino counterparts and added just 10 cents to their values. With the market’s jump the EMI is equal to its spring peak in late September (1609) and just the 2^nd occasion since August that 1600 cents has been achieved. Even though the market rose there are big price discrepancies between the 3 centres. As Sydney escaped the big closing falls on Thursday we are well ahead of Melbourne’s levels (78 cents on 18s and 19 to 21s, 40 cents for 16.5 to 17.5 and 18.5s.) This could signal more price reductions next sale as growers rushed wool into next week after Tuesdays jump to try and capture the rises pushing the roster to 59,900 bales, a 14% (8,100 bales) increase since Monday. It will be the largest sale since April 2018. This opening sale (52,200 bales) was the largest since the corresponding sale last year. Buyers are somewhat perplexed as to why growers continue to rush wool onto the market after big rises pushing volumes to levels where finances aren’t enough to buy all the wool on offer at competitive levels. If the rises weren’t so large, like before Christmas and late October, we could avoid the situation of big rises leading to large offerings, then buyers virtually running out of money to buy all the available wool and the market losing all the previous gains. Buyers seem to think that volumes over 45,000/sale becomes a bridge too far. That doesn’t augur well for next week and then Chinese New Year the following sale. Some exporters did write some business last night - enough to steady the market next week is anyone’s guess.

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