WEEKLY MARKET REPORT 

Week Ending 15th May, 2020

 AWEX Northern Micron Indices Comparison

1 WEEK WONDER!!

Growers were buoyed by the positive start to this week’s wool sale as prices on the eastern seaboard made a surprisingly about-face with fleece indicators jumping by 25 to 40 cents as business was written for immediate prompt. By Wednesday the market reverted back to the all too familiar pattern, cheaper in Melbourne and Fremantle. The AWEX EMI still did manage a rise for the week breaking a 7 day run of falls, up by 9 cents to 1179 and an 11 cent gain in US$ terms to 764 as the FRX had a stable week trading around 64.75 cents. Skirtings in Sydney followed the fleece lead to gain 20/40 cents while fine LKS lifted by 20 to 30 cents as all other types in the carding sector were unchanged. Crossbreds remain out of favour as losses of 10 to 20 cents were across the spectrum. The pass-in rate dropped to 9%, the highest clearance rate (91%) since December.

While always welcome, the rise in the market looks to be short-lived. A smattering of business was written and a positive outcome for growers in this sale but global demand has not shifted to the positive. In fact it could even fall lower as the full effects of a global recession are yet to fully impact consumers till the 2^nd half of the year.

Buyers and overseas mills are reporting prices are at very competitive levels but the key component in selling any commodity is demand which is virtually running on empty so shifting unsold stock is nearly impossible. Even though spinners, weavers and retailers are coming back on line globally trying to process and on-sell tops and yarn that is 200 to 400 cents too dear is proving mission impossible and many still have greasy wool on docks still to hit the scour that were bought at prices deemed too high or, in some cases, orders have been cancelled on this wool. Many companies along the pipeline are facing financial pressure with no cash reserves set aside. Some are using this as an excuse to renegotiate expensive contracts or cancel them altogether. A vertical-integrated company in India has been rumoured to have cancelled hundreds of tonnes of greasy wool contracts. Until all this wool makes its way through the pipeline to retailers and demand picks up, prices paid to woolgrowers will continue to fall or, best case scenario, flat-line given quantities don’t exceed current volumes.

The key to consumer demand getting back to pre Covid-19 level will be the easing of lockdown restrictions and how fast people can resume work and start to spend their disposable income again. Measures are in place in many countries to get people back to work and spending money to speed up the economic recovery as soon as possible.        

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 WEEKLY MARKET REPORT 

Week Ending 8th May, 2020

 AWEX Northern Micron Indices Comparison

IS THE LOW POINT IN SIGHT?

Another poor week for the wool market as the pattern was similar to previous sales with demand almost non-existent as the market recorded more heavy losses across the board. It wasn’t that long ago that buyers were talking of weekly volumes of 35,000 bales being sustainable in the current environment. The absolute lack of demand has meant that, over the past 5 sales, the national catalogue has only averaged 24,000 bales but this has been unsustainable as the market has lost 117 cents, most of that (102 cents) over the last 2 sales. With passed-in lots and growers withdrawing wool the amount of wool cleared to the trade has only been about 20,000 bales/week. The AWEX EMI slumped by another 55 cents to 1170 this week - its lowest point since 2015. The fall in US$ terms was similar - a 48 cent decline to 753, a 10 year low, this despite the FRX falling by a cent to 64.35. Merino fleece types gave up 20 to 65 cents while skirtings fell by 30 to 50 cents across the entire range. Cardings fell by another 20 to 70 cents as the MCI descended by an additional 44 cents to 796 and crossbreds gave up 40 to 50 cents. Surprisingly the passed-in rate fell to 18% down from 25% last sale as more growers seem prepared to meet the market rather than risk a lower price later on.

How low can the market go?? No-one truly knows the answer and opinions are divided. Are we at the bottom? If not, at what level is the low point? And how long will the recovery take for the market to get back to an acceptable level where all participants along the pipeline can make money. Two major buyers we spoke to had varied opinions, from the market perhaps bottoming out sooner rather than later to the market progressively getting cheaper well into our winter months. One buyer thought the only way to help global economies kick start were stimulus packages but this would place all countries in more financial stress - a risk some will not take. The level of consumer confidence in  all major wool consuming countries (US, Europe, Japan and South Korea) has literally fallen off a cliff in April due to the social lockdowns and restrictions that have lead to a collapse in discretionary consumer spending. Only China’s figures showed a very small decline in February before a slight improvement in March, unbelievable!! The world is in a recession and, as to when industry and economies can be running to full capacity and unemployment rates fall as lockdown restrictions ease, then will we see consumers willing to spend their hard earned money again and economic growth rebound to levels we saw pre Covid-19. The wool market absolutely depends on consumer’s ability to spend their excess cash on our product.

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Main Buyers (This Week)

 WEEKLY MARKET REPORT 

Week Ending 1st May, 2020

 AWEX Northern Micron Indices Comparison

AT LEAST IT’S RAINED!!

The market suffered further losses this week as sentiment seems to go from bad to worse. The AWEX EMI gave up another 47 cents to 1225 ( a 5 year low) but just 2 cents in US$ terms to 800 as the FRX appreciated to 65.40 cents (up by 2.25 cents - 3.5%) almost the identical amount the market fell by - 3.7%. Unfortunately the losses aren’t attributed to just the FRX movements.  Virtually no sector was immune from the rapidly declining demand causing all fleece microns to fall by 50 to 90 cents as discounts widened for the dustier types but the better types (and some NM lots) sold to solid competition or even dearer rates. Skirtings fell by 20 to 50 cents while cardings retreated by 10 to 30 cents and crossbreds lost 10 to 40 cents depending on micron. 32 micron is at 270c clean, its lowest point for 23 years. This weeks losses caps off 2 disastrous months for the wool market. April saw the EMI fall by 76 cents (4.7%). This was minor compared to March - a collapse of 294 cents, 11.8%. Looking back to earlier in the year the price shifts were minor as January lost just 10 cents while in February the EMI gained 33 cents, certainly an erratic shift.

The fall in the market and the spread of Covid-19 that has whole countries in lockdown has seen retail spending collapse cannot be underestimated. March figures coming out of the USA saw retail spending slump by 8.7% compared to February, manufacturing output was back by 6.3% and industrial production shrunk by 5.4%, the largest fall since WWII. Buyers were adamant that even with restricted demand national catalogues of 35,000/week would be able to be absorbed. The average weekly offering has been 36,000 over the past 8 sales and just 24,000 in April but this has been a bridge too far. Most of the recent falls came in a period when New Zealand and South Africa had suspended wool sales but now both are back online - SA holding a sale via “Zoom” last week and back into the Port Elizabeth sale rooms from now and NZ selling, scouring and shipping wool again. Even though some form of normality is returning to China as shopping centres reopen, large retail outlets are reporting business is 20% below normal throughput before the shutdown as early stage processing in China is continuing but temporary closures for most combing mills are still in force in Europe, Malaysia and South America. Further down the chain a gradual lift in restrictions is giving some middle and end stage processors in Europe a gradual cranking up of machinery. Many astute judges believe the wool market still has some way to fall while others think that we are close to the bottom as the more production comes online, prices will rise in time but not till late 2020 (even into 2021). Talk about an each way bet!! At least it’s rained again!!

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Main Buyers (This Week)

 WEEKLY MARKET REPORT 

Week Ending 24th April, 2020

 AWEX Northern Micron Indices Comparison

NO REAL CHANGE!

The national offering increased to 25,000 bales this week but price improvements looked even further away as the AWEX EMI gave up another 20 cents to 1272. The fall was similar in US$ terms (26 cents to 802) as the FRX ascended by 1 cent to 63 cents. Broader Merino fleece wools, some Crossbreds and cardings were the main instigators for the fall in the EMI. Fine fleece types < 18.5 finished either side of firm while 19 and broader retreated by 30 to 50 cents, more for the poorer style lots. Skirtings had a solid sale while crossbreds finer than 28 micron lost 15 to 35 cents with broader types unchanged and cardings fell by 10/20 cents.

The smaller weekly offerings that will only average 25,000 to 30,000 bales for the foreseeable future are unlikely to help the market in the short term. Sydney’s total of 4696 bales this week was the smallest weekly offering for 23 years.  The yearly offering is 11% lower (153,000 bales) than last season. The fall in the market year on year has been spectacular. The EMI is 671 cents lower than this week 12 months ago (1943 to 1272), a 34% fall. As the table above shows all fleece microns are 750 to 800 cents behind last year’s levels. The comparison is worse in US$ terms, 1398 to 802, a 595 cent reduction or 42%. The FRX is 12% behind, 63 cents to 72.

Demand is the key to every commodity and, as we’ve seen in the news this week, oil producers were paying refineries to take their oil as storage capacity overflowed while prices fell into negative territory for the first time ever as production outstripped demand by 2 to 1, global airline travel is almost nonexistent and peak hour traffic in every major city is a thing of the past as travel restrictions mean very little fuel is being used (the only exception is on farm) despite prices at the bowser now at 20 year lows. Wool exports of raw wool was 10% lower from the 5 major exporting countries (NZ, SA, Australia, Uruguay and Argentina) this season to February, this due to the ongoing drought here in Australia, demand falling from August and the start of restrictions due to Covid-19. The figures for March/April will be worse.  Looking at the countries that process wool, China imported 11% less than the same period to February; Italy was 19% lower; and the Czech Republic 16% back; but India had a 5% improvement. These figures are guaranteed to get worse as March/April retail numbers come in because retail spending (bar food and liquor) keep falling globally.

Next week has a similar volume on offer but no magic bullet in sight. Despite the rapid decline of the market lately 21s are still trading at 83% of their value since 1995 - just 17% of that time spent over 1500 cents in 2011,2015 and most of the recent period since 2017.

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WEEKLY MARKET REPORT 

Week Ending 17th April, 2020

 AWEX Northern Micron Indices Comparison

THE SALE WE HAD TO HAVE??

This week’s sale that was originally rostered as a recess drew for a national catalogue of 21,000 bales but, after withdrawals, 18,000 were offered. The market barely moved as the AWEX EMI lost just 9 cents to fall below 1300 cents to 1292. As the A$ ascended by almost 3 cents (4%) to +64 cents, the market in US$ terms added 31 cents to its value to 828. Fleece movements were minimal as losses in Sydney were up to 10 cents while Melbourne’s market was in the positive by up to 15 cents, bar 20 micron and broader. Skirtings lost about 10 cents while cardings were either side of firm. Crossbreds were the biggest loser of any sector - 10 cents cheaper in Sydney but Melbourne’s 20 to 50 cent falls were the contributing factor to the EMI’s overall fall.

Was this week’s sale a success? Did we need to hold it?? Debate will rage for some time but next week’s volume is now 31,000 bales instead of the 45/50,000 that would have been offered if this week was kept as a recess. Most exporters warmed to the sale and the more manageable weekly volumes that are on offer for the next month which average about 30,000 bales, not too much in this volatile environment. Apart from the unscheduled sale that was held there were 3 on-line auctions trialed. AuctionsPlus held a sale yesterday with 4 brokers offering wool with 10 buyers bidding. WoolQ also held a sale this morning in which we and 3 other brokers participated with a similar number of exporters bidding. Another auction was held using Zoom on Wednesday morning. All three systems are in the very early stages of development and will need some refining of course but were met with enthusiasm from all parties and going forward will be fine tuned to complement the open-cry auction.

The IMF released new forecasts for global economic growth for 2020/21 (like darts at a dartboard). Economic growth is predicted to fall by 3% globally before recovering by 5.8% in 2021 as most developed country’s unemployment rates go to 10/15%. China’s economy could still actually grow this year by 1.2% and by 9.2% in 2021 but Italy’s economy could shrink by 9%. Even with the anticipated rebound next year all advanced economies will be smaller than 2019. China’s retail clothing sales for January/February were back by 33% compared to the same period last year and, in the US, March clothing sales were down by 50% compared to February - massive falls. This downturn, which will worsen, is being seen in retail orders to garment and fabric suppliers with unconfirmed reports of mass cancellations of orders by retailers with some big operators refusing to accept shipments. This is very bad news as consumer demand collapses for not only woolen clothing but whitegoods, electronics and a plethora of non-essential discretionary goods.

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Main Buyers (This Week)

 WEEKLY MARKET REPORT 

Week Ending 10th April, 2020

 AWEX Northern Micron Indices Comparison

MARKET STEADIES!

After last week’s disaster anything less than a solid market would’ve been met with tears. Fortunately the market did the right thing and recovered a minute amount of the previous series’ losses - the EMI up by 14 cents to 1301. All merino fleeces lifted by 10 to 35 cents. Skirtings moved ahead by 30 to 50 cents while cardings were unable to ascend in price giving up 10 to 20 cents across the board. Crossbreds had a mixed sale as < 28s were either side of firm while broader types lost 25/30 cents.

The large anticipated offering of 44,000 bales didn’t eventuate as mass withdrawals (22%) saw just 29,500 bales offered nationally. As global demand (especially in Europe & North America) collapses with import bans now in place in India and Europe we are virtually left with one market, China. Buyers are reporting that any weekly offering over 35,000 bales is too much both in volume and financially for China to handle on their own with quantity below this level being absorbed as this week’s sale proved. To help cap the volume of wool to be offered NASC (National Auction Selling Committee) has approved the proposal to limit the number of lots in each selling room to 1000/day in each centre sending a clear message that we will try to offer the volume that can be bought without too much angst.

There have been many varied opinions, from growers through to retailers, as to how the wool trade tackles the problems that Covid-19 has and will continue to cause our industry well into this year and beyond. It’s a given that the world will fall into recession and some economists even predicting a depression. Arguments for and against sales continuing, the July recess brought forward or shortened from its current form to 1 or 2 weeks have been the hot topics of discussion this week. Wool Industries Australia members met this morning and reaffirmed their support of free enterprise principles to allow the continuation of the exchange of ownership of wool in these difficult times. Sellers should be able to sell their wool to the highest bidder if they choose to sell and buyers also given that same right to buy wool or not to buy judged on their situation of finance and ability to sell wool down the pipeline through to the retailer. There is no support to cancel or suspend wool sales as New Zealand and South Africa have done.

Next week, which was originally a recess, has been added to the selling program with 21,000 bales on offer, this to avoid a backlog of wool should open-cry auctions be postponed due to Covid-19.

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Main Buyers (This Week)

WEEKLY MARKET REPORT 

Week Ending 27th March, 2020

 AWEX Northern Micron Indices Comparison

HOW FAR DO WE LET THIS GO?

We thought we had seen it all over the years, stockpiles, droughts and the like but nothing really compares to, or conditions us to the marketing environment we are presently faced with. All players in our industry, from growers through to retailers, are in a bind and trying to choose between a raft of poor options in front of us.

Firstly, to deal with our own situation, on Monday I called a staff meeting to put a hold on all non essential travel for staff. This means that, unfortunately, we won’t be making shed visits or sending extra staff with clients to wool sales. The woolstore is operating at present as normal with transport so far unaffected and we are still testing wool for sale whilst they continue. Some staff have been asked to take leave and stay at home and some staff have been asked to work from home where possible but our office and store are manned and functioning well. Ian Sharp, who is based in Sydney, is collaborating with other brokers in our group who are also only sending one person to the sale.

The real question that is spinning round the industry is how long should we keep selling for, or how long we will be able to continue selling? There is real pressure mounting, particularly from European processors to call a halt as, whilst we sell into a downward spiral, it continues to erode their inventory positions but they cannot purchase whilst their borders and factories are closed. The same is the case for wool destined for India with Australian buyers sitting on quantities of purchased wool that they can’t ship. There is real fear that, in some cases, contracts will be reneged or renegotiated which will cause severe financial loss to some traders.

Whether we continue to sell or not, in the short term there is no doubt that the wool market is in for a tough trot like many commodities. We don’t know where the bottom is and can’t honestly advise growers whether they should sell now or wait. For those who choose to wait, it could be months before we see an upturn. My view is that we need to continue selling in some form. I’m not convinced that the public auction right now is the best way to do it. There are various private selling options and electronic sale methods currently being trialled. The EMI lost 155 cents this week or nearly 11%. We don’t need too many weeks like that but the major brokers have stated they will continue to sell regardless and allow growers the choice to sell or not and, as we saw last week, those that did decide to sell (which was only about half of the offering) still bore the brunt of a market with no confidence. Would a one, two or three week recess help? I think a brief recess is needed to judge better the global situation and allow traders time to catch up with their finances which are stretched to the limit.

Next week there will be 44,400 bales to be offered and growers need to think carefully about their selling instructions and consult well with their broker. Please keep safe and well, and we look forward to catching up in person when this has past.

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Main Buyers (This Week)

 WEEKLY MARKET REPORT 

Week Ending 27th March, 2020

 AWEX Northern Micron Indices Comparison

WOOL SALES STILL ON!!

In the midst of Covid-19 engulfing the globe the wool market managed to keep its head above water as the AWEX EMI ascended by just 4 cents to 1442. In US$ terms the rise was significant (up 53 cents to 854), this due to the upward shift in the FRX to 59 cents - up by 3 cents (6%).  Merino fleece < 20 micron added 5 to 40 cents with 21s and broader falling by 25 cents. Skirtings also tracked upwards by 10 to 20 cents while cardings continued on their slide as the MCI fell below 1000 to 987, off by 17 cents. Crossbreds had a solid sale to finish unchanged. Reports from China say that all provinces bar Hubei (where Covid-19 originated) is back to full production but, due to lockdowns and restricted travel, consumer spending has collapsed by 30% in the past 6 weeks. In news from Italy, after trying to keep mills open for the foreseeable future, the decision was made to close all topmaking plants, woollen mills and spinners and weavers.      

As the world tries to comprehend the magnitude of the effects on everyday life from Covid-19, wool sales will continue. After the government’s announcement earlier in the week that auctions would cease, clarification today from the Dept. of Agriculture announces that livestock and wool sales could continue under the strict social distancing and hygiene practices as they are deemed an essential part of the Agricultural supply chain. Wool sales have moved from the sale rooms in each centre to the showfloors to allow sufficient space between buyers and auctioneers with sales to be restricted to 2 days (Tuesday/Wednesday) leaving Thursday free in case a centre has to cease selling 1 of the other 2 centres can sell their wool to avoid a build up and backlog of quantity. Australia will be the only country to offer wool to the world as South Africa and New Zealand have suspended wool sales for the next 3 weeks. Also released today was new protocol for shearing. (Both these documents in following email for your viewing.)

Many participants in the trade are also exploring other avenues of selling in case wool sales are forced to stop. All avenues of technology that can trade wool on electronic platforms for online selling are being closely monitored and several methods have already undergone trial should the need arise to convert to these methods of selling.

We are still hearing that the market has far more potential to fall than rise and, given the situation in Europe and North America with borders closed and lockdowns of cities and countries in full effect, consumer spending will take massive hits which could result in a wool market losing far more than the 10% we’ve seen to date.

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Main Buyers (This Week)

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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Main Buyers (This Week)

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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Main Buyers (This Week)