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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Main Buyers (This Week)

 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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WEEKLY MARKET REPORT 

Week Ending 20th December, 2019

 AWEX Northern Micron Indices Comparison

CONFIDENCE IS KING!!

Last sale’s upward shift in the market accelerated this week - the final sale before the 3 week recess. The AWEX EMI rose by 55 cents to 1558 and 32 cents in $US terms to 1066 despite the FRX staying well above 68 cents. Buyers were keen from the get-go with large increases in the opening session followed by a more measured approach on the final day but still good gains. All fleece microns posted gains of 75 to 95 cents regardless of style or any faults. Skirting’s were also in good demand as buyers pushed all types in this sector 60 to 90 cents higher. Crossbreds were also keenly sought after as most microns added 60/70 cents. The only sector to not explode in prices was cardings. Sydney and Fremantle averaged 20 cent rises while Melbourne lost 7 cents to have the 3 centres’ average price at 1070.

Despite the anticipated large offering (39,400), the high FRX and shipping logistics delays, the market had its largest weekly increase for 12 sales. The final volume offered was 12% lower than originally rostered due to a high withdrawal rate and with no chance to buy any meaningful quantity till mid January buyers were under pressure to fulfil outstanding commitments from the reduced selection on offer.

This year, particularly the final 6 months, has been one of the toughest periods for all in the industry. Firstly growers are still combatting the worst drought for over 100 years, massive reductions in sheep numbers, poor quality wool and a drop in the market of 17% (1862) from 12 months ago to 1558. The peak of the market was in mid February at 2027 and the low point was early September when the EMI got down to 1365, a 33% swing. At the high point in February just 252 cents separated 17 from 21 micron (2620 to 2368). At the cheapest point of the year the spread wasn’t much wider, 17s at 1842 and 21s were 1487 - a 355 cent difference. Exporters have had a year to forget as well. The high prices from last year into 2019 proved unsustainable as global events that we have spoken about in several reports conspired against them as consumer demand weakened. The market’s demise started in May and peaked in August, falling 163 cents in a single week only to stage a remarkable recovery in S11 climbing by 170 cents. Buyers, understandably, couldn’t trade with any confidence with such wild swings and are still feeling the effects now. The British election outcome and the softening of trade tariffs have boosted confidence that will hopefully carry on into the new year.

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 WEEKLY MARKET REPORT 

Week Ending 13th December, 2019

 AWEX Northern Micron Indices Comparison

MARKET BACK OVER 1500!!

After 7 straight days of falls adding up to almost 100 cents, the market had an unexpected turnaround as the AWEX EMI posted an 11 cent gain to 1503. Several factors were pointing to further losses for the market: the large offering, adverse FRX rates, the ongoing poor quality and global economic concerns almost certain to lead to a cheaper market. High rates of withdrawn wool (12%, 6000 bales) saw a much more manageable quantity for buyers to handle and some hidden prompt that appeared was all the impetuous the market needed to strengthen.

Despite the small upward adjustment this series was one of the most impressive sales of the season insofar as the big players of each segment dominated, local based traders to China led the merino sector, the biggest top-maker in the world was atop the crossbred sector and the largest global carbo processor was No.1 for cardings and oddments. Most fleece microns added 10 to 25 cents to their values. Skirtings had a mixed sale as the opening sessions’ gains were given up on the last day to leave them just in sellers’ favour for the week. Cardings averaged 19 cent losses across the 3 centres as all types fell by 10 to 30 cents. Crossbreds also had mixed results as < 26 microns were 15 cents lower while broader types added 10/20 cents.

The steadying market was welcome news after 3 weeks of falls and no talk that the market was about to stop its downward trend. Even after the high percentage of withdrawals buyers were faced with the largest catalogue since May but the end result was pleasing to all participants. The national turnover for wool sold passed the $1billion mark this week but it took 7 more sales to reach this milestone than it did last season - a result of the falling market and less wool offered (80,650 bales 10%). In what will be good news for the global economy (and the wool market) the US has agreed to halve tariff rates on $350bn worth of Chinese goods, some of which were as high as 25% and, in return, China would boost purchases of US farm products. This latest agreement should avoid US threats to impose tariffs on more than $150bn worth of Chinese exports that were due to start next week. Stock market reaction was swift as Asian markets rose 2% and Wall Street again set new records. Confidence is a great thing!! The market should end the year on a solid to dearer note for the final sale of the year.

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Main Buyers (This Week)

WEEKLY MARKET REPORT 

Week Ending 6th December, 2019

 AWEX Northern Micron Indices Comparison

MARKET FALLS UNDER 1500 cents!!

Another tough week for the wool market as the downward trend continued on for the 3^rd sale in a row. Steady falls all week saw the AWEX EMI peel off by 38 cents to fall below the 1500 cent mark to 1492 - its lowest point in 13 weeks, 357 cents lower than this sale last year. In US$ terms the loss was only 15 cents to 1020 somewhat cushioned by the strengthening FRX to 68.5 cents. This ascendency, along with the subdued demand, contributes to the falling market. Losses were most severe in the finer microns, < 18.5 giving up 50 to 70 cents while 19s and broader fell by 30/40 cents with the better style, good spec types less affected while the dustier/tender lots saw the discounts widen on these. Skirtings also took a hammering with all types falling by 50 to 80 cents. The only highlight was the Carding sector which added 7 cents to 1061 while crossbreds lost 20 to 30 cents.

A wane in demand, the logistical headache of shipping wool over the Christmas/New Year period, the timing of the Chinese New Year (25^th January) and a sudden spike in offerings for the last 2 sales of the year are all conspiring to send the market on a downward spiral - 100 cents fall over the past 6 weeks. The large offerings and inability of buyers to deliver wool on time is severely hampering normal buying and shipping activities. This week was, in effect, the final opportunity to ship wool to China for arrival before their New Year shutdown so the large offering at this time is bad timing for exporters and mills. This means a 2 to 4 week additional financing period that is required for exporters for any wool destined for China that is bought over the next 2 sales if delivery is not “prompt”, one week for shipment delay due to Christmas and up to 2 weeks for the Chinese New Year shutdown. The margins are tight at the best of times let alone this situation when hand to mouth modus operandi that all the trade use.

AWTA released their November figures which saw a 1% fall when compared to the same month last year with the progressive total for the year running at 8.5% less wool tested than last season (127.5mkg to 139.4mkg) and 77,175 (10.5%) less bales offered than last season. Next week’s sale (48,500) could be the largest since end of April growing by 9,000 bales (23%) since last Friday, Melbourne’s catalogue ballooning by a massive 27%.

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