WEEKLY MARKET REPORT

Week Ending 5th March, 2021

 AWEX Northern Micron Indices Comparison

FALLING AUSSIE DOLLAR SAVES THE MARKET!

Stability looks to have set in for the wool market as this week’s sale produced just a 4 cent gain to 1310 cents. This follows on from the previous 2 series where the market has fluctuated by only 12 cents (1318 to 1306). All the pre-sale talk was for a cheaper market with the FRX reaching a 3 year high to climb above 80 cents (twice) which could’ve had the market on the back foot to the tune of 30/40 cents. Fortunately the A$ retreated to low 77 cents on Friday, this allowing buyers to stay in the game and do sporadic volumes of business to have a market that was just in sellers’ favour. With the falling FRX the market, in US$ terms, shed 20 cents to 1020. Sydney’s market wasn’t as positive as Melbourne’s with most microns either side of fully firm apart from 18 to 19 micron which shed 10 to 15 cents. Skirtings faded in the final session to finish the sale 10 cents cheaper. Cardings halted their run of 4 cheaper weeks with the MCI adding 10 cents to 869 as most types in this sector posting gains of 10 to 20 cents with < 17 micron lots up to 40 cents to the good. Crossbreds also had a solid sale with broader types > 27 micron fully firm and finer lots 10 to 20 cents higher. Australia’s biggest buyer and trading company (Techwool) dominated buying lists for most types with solid competition from topmakers and processors alike. Growers certainly warmed to the stable market as the passed-in fell by 9% to 9.3% with XBs still the biggest contributor to passed-in wools.

The fall in the FRX produced a scenario that sustained the current price levels despite a not-so-ideal retail economy. The softer FRX gave overseas mills and processors a cheap buy in price if operating in US$ or Chinese Yuan (CNY). The price advantage added up to 2%. As we have mentioned recently the logistic delay in shipping wool to its final destination is restraining buyers financially with additional business unable to be written. Knocking back new business due to financial constraints is nothing new but is just part of the business with the delays in shipping and therefore payments representing 2 weeks of exporters normal auction buying budgets, thus hampering further gains the market might have had with quicker finance available.

Much has been written in various media outlets recently regarding premiums for non-mulesed wool and the demand for it. Nearly all demand is coming from Europe and, with that sector of the market still a long way from being fully operational, premiums were and still are sporadic at best. Some media outlets reported “good premiums” of 20/30 cents being paid recently. A 1 to 2% premium can hardly be called that in most cases.  Most growers with non-mulesed wool are being urged to join a quality scheme called RWS (Responsible Wool Standard). More and more orders that request NM wool are specifying RWS certification as well. One grower who we sold wool for this sale looked to benefit from being in this scheme as the premiums ranged from 80 to 200 cents clean for the fleece wool that averages 4 to 5% VM. This amount of burr would attract a discount of 100 to 160 cents clean normally.   

Next week’s offering has just shy of 50,000 bales on offer to the trade - pretty much a normal volume when looking at the totals since January. Barring any disaster with the FRX ascending, the market should hold around these levels with still no word on when the trigger will be pulled on the Chinese government uniform orders. For those growers who wish to follow the Cumnock Ewe Competition next Tuesday there are a few seats left on the bus that will be going around the farms that have entered sheep. Contact Scott Darmody on 0402 772 342 or scott@macwool.com.au for any information regarding this good day out.

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 WEEKLY MARKET REPORT

Week Ending 19th February, 2021

 AWEX Northern Micron Indices Comparison

MARKET CRACKS 1300! YIPPEE!!

The Chinese New Year celebrations didn’t stop the wool market from advancing this week to break through the 1300 cent mark for the 1^st time in almost 12 months. Often around Chinese New Year can be a difficult time to sell wool due to mills being shut down and a sometimes general lack of interest but not the case this year. The AWEX EMI shrugged off the lacklustre 2 sales that saw the market fall 16 cents to record a 43 cent gain to 1318. The rise was just as impressive in US$ terms, a 37 cent jump to break through the 1000 cent mark to 1022 as the FRX was stable for the week at 77.50 cents. The market looks to be performing well in regard to FRX movements. 12 months ago the A$ was 66.50 cents - 16% less than the current level. The fear that medium micron wools (19 and broader) were getting left behind in the market rise were allayed this series as they posted the largest gains, 18s and coarser gained 60 to 85 cents (some better style types were up to 100 cents dearer). Fine fleece types did ascend also but the gains were restricted to 20/30 cents, a nice warm-up for the designated super-fine sale in Sydney next week. Skirting price movements were based purely on VM. All types < 3% VM with good AM results added 35 to 55 cents for the week with all burrier types fully firm. The carding sector continued on from the losses of the past fortnight to average a 17 cent loss over the 3 centres. LKS/CRT, broader than 17.5 micron, fell by 10/20 cents with STN taking the brunt of the losses retreating by 40 to 60 cents. Crossbreds had a mixed sale with combing types solid to 40 cents dearer but burry carding types and XB LMS were punished with some lots receiving only token bids. We passed-in 55% of all our XB LMS offered with talk that the road ahead for XBs could be a long one before there is any sign of improvement.

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 WEEKLY MARKET REPORT

Week Ending 12th February, 2021

 AWEX Northern Micron Indices Comparison

HAPPY CHINESE NEW YEAR, HOPEFULLY!

Since the big rise of 2 weeks ago the market had pretty much marked time but, by the numbers, has cheapened up slightly. The AWEX EMI lost 10 cents this sale to 1275 following on from the 6 cent fall the previous series with XBs, cardings and broader merino fleece types (20 micron and stronger) the main contributors to the EMI falling. This week’s largest offering since the opening sale of the year and the strengthening FRX gave buyers an opportunity to relax their buying patterns and take stock of what has been a frantic start to the year. With the stronger A$ the market rose slightly in US$ terms, up by 6 cents to 985. The merino combing types fared well despite the increased volume with all microns adding up to 10 cents bar 20s and broader which lost 5 to 20 cents. The worry for these broader types is the increase in volume of these microns due to the good season pushing clips broader with many growers reporting their wool 1 to 1.5 micron coarser than last year. The demand for these broader types has not increased as the volume has; with the opposite effect on finer clips - less in volume and increased demand. The pattern of price movements was the same in the merino skirting sector, fully firm for types < 20 micron but 10 to 20 cent losses for the broader types. A we mentioned earlier the fall in cardings contributed to the overall fall in the market. Washing types (< 2% VM) finished the sale unchanged with the 3% VM and higher lots losing 10/20 cents for the week. The MCI in Sydney fell below 900 cents to 898 - a loss of 11 cents. Just when we thought (and hoped) XBs may be on the long road to recovery, they took a large hit and were the main reason the EMI fell this week, all microns fell between 10 and 60 cents (5 to 8%).

Melbourne featured an excellent selection of Tasmanian wool this sale which seemed to woo the Italians from their slumber to underpin the solid market and increasing demand for fine and superfine types with these MPGs adding up to 45 cents in the south. You would expect these wools to be top prices for the week but it was a few lots from our colleagues in Cooma, Gordon Litchfield Wool, that sold two 14 micron lots for 3140 and 3020. Traders dominated the top positions of buying lists with top-makers, processors and indent operators all keen to purchase for their immediate needs. Apart from Chinese mills providing the backbone for current prices and the Italians chasing the “top end” clips, the largest European top-maker continues to operate with a smattering of Indian orders competing as well.  

Today marks the start of Chinese New Year, sometimes a tricky part of the year to sell wool. Many businesses are now closed for a week to 10 days which may cause difficulty in financing wool purchases for the next 2 sales. Reports have some mills already closed, some taking a 4 week shutdown and others working through the festive season to avoid workers returning from other provinces having to quarantine for 14 days. Some reports also suggest that a bit of “stocktaking” has happened over the past few sales even with demand further down the processing pipeline less than expected or needed. There is still plenty of showfloor chatter that massive uniform orders from the Chinese government are set to be placed at any time - most likely post Chinese New Year. Speculation is rife on the volume and make-up of the types of wools they will be purchasing but when it happens will it be like the charge of the light brigade?

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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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WEEKLY MARKET REPORT

Week Ending 29th January, 2021

 AWEX Northern Micron Indices Comparison

BIG JANUARY LIFT IS DELIVERED AGAIN!

Melbourne’s dearer market on the final day of last week’s sales was just a taste of what was to come this week as all buyers unanimously were predicting a dearer market by at least 30 cents. This would have the market in the north rise by a minimum of 60 cents as we were well behind the Melbourne stand-alone market of last Thursday when some of their MPGs added up to 60 cents. From the opening lot prices skyrocketed with every fleece indicator in Sydney adding 100 to 140 cents to their previous values. The final day’s auction was more subdued with modest increases being recorded but, looking at some of the individual prices, some were better and some slightly cheaper than the quotes AWEX released after the sale. Most buyer sentiment was that the market “had the wobbles”. Still, by week’s end, it was a great result as the AWEX EMI climbed by 89 cents to 1291 cents with a 51 cent rise in US$ terms to 985 as the FRX fell by 1.5 cents to 76.25. All fleece indicators added 110 to 145 cents with virtually no type neglected and discounts for VM or any other fault shrinking as just 3.3% of the fleece offering in the north failed to sell. Skirtings were also swept up in the mad dash for wool as the large increases on the opening day were followed up by small gains in the final session but no hint of the market getting the jitters. Overall increases were 150 cents for the < 18 micron, < 2% VM types out to 19 micron jumped by 90 to 120 cents with the broader types looking 70 to 90 cents dearer. Of course, growers welcomed these substantial gains as just 36 bales-2.1%- failed to sell. Cardings also had major gains as the 3 centres’ MCIs are now all above 900 cents, 906 to 952 with the Sydney and Fremantle MCIs lifting by an average of 86 cents as all types in this sector (finer than 19 micron) added 100 to 130 cents with the broader selection 60/80 cents to the good. Crossbreds had their largest weekly rise since late October with 26.5 and finer adding 60 to 80 cents with the broader microns posting gains of 50/70 cents.

History tells us that for quite some years the market experiences a big lift in January. This year we had to wait till the final week of the month - but it happened. A 7.3% gain in the market for this series sees it at its highest point since mid-April with 19s and finer actually higher by as much as 459 cents (16.5 micron) with the broader wools up to 215 cents cheaper (21s). The recent pattern before Christmas when a big rise was on the market would react swiftly in the opposite direction and lose all the gains and momentum just as quickly. When the market has triple figure gains selling anything at the new level becomes almost impossible, 2 major buyers we spoke to yesterday said they hardly sold a bale on Wednesday night. This lack of sales became apparent in Fremantle late yesterday when the market gave up some of Wednesday’s gains - 20s and 21s now 65 and 90 cents behind the East coast levels with < 19.5 10 to 30 cents lower. This doesn’t auger well for next week as most forecasts are for a market to react in the negative hopefully not to the extent that we saw on several occasions pre-Christmas.

Traders and their Chinese counterparts led the price recovery this week. Bids well above the market were being received late last week and on Monday which quickly converted into instant and steep price rises in the opening session. The call for new business followed the rising market injecting further impetus into the gains. The smaller than anticipated offering of <40,000 bales and the depreciating FRX and demand from new forward and relatively prompt shipment orders also contributed to the (at times) frantic buying. 47,000 bales are on offer next week. Hopefully the EMI stays above 1250 cents.

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WEEKLY MARKET REPORT

Week Ending 22nd January, 2021

 AWEX Northern Micron Indices Comparison

MARKET CRACKS 1200 HELPED ALONG BY SUPERFINES!

The market continued on from the solid start of last week with all sectors of the market fully firm to dearer. The national catalogue was predicted to be 54,000 bales early last week but was reduced heavily to 44,250 by the close of selling in Melbourne on Thursday, a drop of 18%. The pass-in rate fell to 7.6% with the dearer market to see 40,880 bales sold. The AWEX EMI gained 30 cents (2.5%) to 1202 and 27 cents in US$ terms to 934 as the A$ ascended slightly (77.70c), a change of 0.25%. Emphasis was on the sub 18.5 micron types in both sale rooms with fleece types 17 and finer posting gains of 105 cents while 17.5 to 18s added 60/75 cents and 19.5 in buyers’ favour and broader microns -15 cents. Skirtings added some impressive numbers from the opening sale as 18s and finer lifted 60 to 90 cents with broader lots 20 to 40 dearer. The carding sector again performed well with the 3 centres averaging a 41 cent gain. The cut off point for gains was similar to their combing counterparts; 18 micron and finer gained 35 to 50 cents while broader types lifted by 20/30. Crossbreds also had a reasonable sale as 26 and finer were in buyers’ favour with broader lots up to 10 cents dearer. As was the case last week, growers were looking for more of an increase as 17% was passed-in.

Finer wools certainly look to be the flavour of the month. The push for < 18 micron types started before Christmas and has continued in earnest over the past 2 sales. Broader wools seem to be in a holding pattern with the difference between 16.5 and 21 micron in Melbourne 1,055 cents (2224 to 1169) - this gap a long term average price difference. The gap in July (Sale 1) was just 500 cents, 1694 to 1194. One reason given for the widening price differential is the change of micron profile over the past 12 months. With good seasonal conditions over a vast area of wool growing districts the clip has broadened up with sheep not suffering from drought conditions and wools 19 micron and broader becoming more abundant and less wool finer than 18 micron. This situation is a complete reversal to what was happening in the drought.

As has been the case for some time Chinese buyers and forward traders dominated the market along with their top-makers and indent buyers. Showfloor chatter centered around the potential for large Chinese government uniform orders being placed. This is in stark contrast to the trouble that other exporters are having with China as their government is one of our largest single customers. Enquiry for forward offers continue to flow from the sub-Continent and Europe but the successful conversion rate to written orders is a long way off normal support from these two important destinations. The recent announcement that the tariff-free quota in China for the import of clean Australian wool is to be increased by 5% is welcome news. The increase of 3,600 tonnes of clean wool is part of the scheduled increase of 5% each year until 2024 when the quota will reach 44,300 tonnes. The rest of the clip that is shipped to China attracts just a 1% tariff which sees in this financial year 38,300 tonnes of clean wool which equates to 333,000 greasy bales free of tariff.

Next week’s national offering is very similar to this sale, 44,000 bales. The market finished very strongly in Melbourne on Thursday when they sold in isolation. As the market stands at the moment, 16.5 to 20 micron is averaging 40 cents higher in Melbourne than Sydney with all participants expecting our market to catch up to Melbourne next week when sales resume.

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Main Buyers (This Week)

 WEEKLY MARKET REPORT

Week Ending 15th January, 2021

 AWEX Northern Micron Indices Comparison

A SOLID, STEADY START!

It’s been 4 weeks since our last report and plenty has happened on a global front. Political chaos in the US, the pandemic almost out of control in many countries with vaccines released (but slower administering than governments would like) to good summer storms over big areas to set up a good late summer season and the recommencement of wool sales. All participants were nervous about the start of sales for the new year: a big anticipated offering for the opening 2 sales of 111,500 bales and the appreciating A$ over the recess to above 78 cents last week (3% higher than the close before Christmas) led to talk of the market losing 30/50 cents and, in fact, a tough 2/3 weeks was all the talk with the large volumes and the high FRX. By last Friday the chatter had turned positive to have a market solid at least for the biggest sale since March. The EMI lifted by a modest 15 cents to 1172 and 33 cents to 907 in US$ terms due to the rising A$. The finer microns < 18.5 performed the best gaining 10 to 60 cents - the finer the micron the higher the rise as 19s and broader look to be in a holding pattern. Skirtings also added to their pre-Christmas values with identical gains to the fleece wools, finer than 18 micron 10 to 60 cents higher with the increases higher with the finer microns. Cardings also had a good opening to the year with the 3 centres averaging a 38 cent rise with all types in this sector rising by 10 to 50 cents. The large XB catalogue (24% of the national total) was the least performing sector of the sale with all buyers struggling to do business and recovery could be a long time off. The market was in sellers’ favour (up by 10 cents) but growers were looking for bigger increases as 20% was passed-in.  

As far as the national volume was concerned it was the same old story as last year. The original quantity on offer didn’t eventuate as Monday’s forecast of 56,840 shrank to 52,290 - a reduction of 4,550 (8%) with a pass-in rate of 11% saw 46,500 bales sold to the trade. Focus was on the sub 18 micron types as the improved seasonal conditions in a lot of wool growing areas will see microns broaden out with less super-fine types available. On the Chinese processor side, the current lack of competition from Europe and India in the super-fine sector has opened up big export opportunities for them to supply yarn and tops to these destinations. Traders and Chinese top-makers dominated all sectors buying lists.  

Away from wool sales but certainly related is the current shortage of shearers on the Eastern seaboard. All contractors are reporting of a big shortage of shearers and shed staff. Many contractors are running well behind schedule and are splitting teams to try and catch up. We know of several clients that had shearing booked in well before Christmas that are still on a “waiting list“ or just getting sheep shorn now. Weekend shearing and growers offering to pay over $4.00/head to attract shearers is not uncommon. The problem has been brewing for months now which has been exacerbated by the pandemic. Early last year when international travel was closing down a lot of Kiwi shearers went home and have not been able to travel back to Australia. Also the shearing rate in NZ has lifted substantially to now be comparable to the rate here. This will help Kiwis stay at home where they can earn the same $ that they would have here and contend with a lot less merinos there thus depleting shearer numbers here for the long term, not just while Covid-19 is on the radar.  Also the closed borders in Australia late last year prevented any interstate travel which is part of normal shearing practice. Shearing shed and accommodation standards are always a problem and some contractors are saying if these are not up to a certain standard they may be in a position to “pick and choose” their sheds depending on the facilities or lack of. Just under 50,000 bales are on offer next week with a solid market all the talk.

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