Market correction drops EMI by 52c | Elders

Market correction drops EMI by 52c


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The Australian wool market was pushed down rather firmly in the past week.

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MARKET CORRECTION: The Australian wool market was pushed down rather firmly in the past week.

MARKET CORRECTION: The Australian wool market was pushed down rather firmly in the past week.

A CHOPPY currency market, tight exporter finances, the on again/off again potential trade war and a gathering chorus of customers saying ‘too high’ all conspired this week to push the wool market down rather firmly.

It was not a dramatic fall nor unexpected, but it was significant enough so that everyone was aware that a correction was underway. In local terms the AWEX EMI closed down by 52c and Euro37c. In US dollar terms the basket indicator was only down by US22c.

The correction in price for most wool was gentle and controlled, perhaps with the exception of the poorest style, low processing value wools that received a caning from the trade and discounts of more than 100c became apparent. With a plethora of these types in the Melbourne selling centre the correction there for the week reached triple figures in the 19-micron area.

AWEX’s northern market indicator closed down 31c on 1869c. The 17 micron indicator closed on 2802c, 18 micron 2395c, 19 micron 2085c, 20 micron 1958c, 21 micron 1887c, 22 micron 1863c, 28 micron 808c, and 30 micron 580c.

There were very few people in the trade surprised that the market has had a bit of a correction this week. - Bruce McLeish

Buyers were avoiding the more difficult to process high VM fleece lots, and so were very reluctant to purchase the even higher VM skirtings from these clips, resulting in large pass-in rates. Carding wools followed the trend in general, but they have already had their decent correction this year so there is less resistance built up at present. Crossbreds continue to beat to a different drum and meander along with very little change in price for the week.

There were very few people in the trade surprised that the market has had a bit of a correction this week, although there are always a few eternal optimists or new kids on the block.

Chinese mills had returned to work following the spring festival and as usual many have to hire a few new staff to replace those who did not return or found other jobs over the break. So production is slowly winding back up again throughout the Chinese textile industry and as is normal for this time of the season the bulk of the production demand is centred on the uniform trade. Hence the demand for knitwear is slowing, although raw material stocks are still considered to be low.

Superfine fabric demand is also starting to back off as usual at this time of year. Given the current high prices for wool in US dollar terms, and even more so at the finer end of the range procurement managers and the like are searching for ways to make a uniform that does not blow the budget. They need a reasonable wool component; as everyone knows that pure poly simply does not cut it. But to obtain a finer micron or denier polyester it is simply a matter of turning the dial, and doesn’t cost very much.

So the uniform blend of choice at present is fine denier poly with broader Merino wool in the hope of keeping the cost down a bit. Uniforms will always be challenged by a rising wool price, given it will be the government department or company accountants who are paying for them, and the budgets were set in place a long time ago.

Other sectors of the wool industry are still rolling along, doing what they normally do, but given their distance both geographically and in shipment time they are not providing much demand in the greasy wool auctions at present. For a European spinner to purchase greasy wool in Australia at present and have it commission combed in China or Italy would mean delivery of wooltops at the end of June.

So in another couple of months they will start to think about the 2018-19 season, but for the time being they are focussed on processing what raw materials they have in front of them, or already in the pipeline. This does not help the current demand situation in the Australian auction room however and so the correction we have seen this week will probably take another week or two to play out.

After which time the market should find a temporary base again as greasy stocks in front of Chinese early stage processors remain low. By May/June Chinese and Russian domestic wools will begin to become available and therefore lessen the demand for the high priced Australian Merino types.

It seems that the media has not yet worked out President Trump’s methodology, which involves establishing a negotiating position and proceeding from there. At the moment everyone reacts to the first utterance as if it is set in stone, when it is merely an opening gambit. Nevertheless some argy bargy around world trade practices will evolve, and be destabilising for the general economy, which is something we could do without at present. Hopefully this does not spill over to the textile industry, but it is something to watch.

Superfine: As the season draws to a close all eyes will be on the first emerging signs of the prospects for the new season. 30 odd growers will get to hear it first hand when they visit Italy in June to talk directly with processors there.

Medium Merino: With increasing supply of 19/20 micron and declining quality facing up to a shift in demand to towards broader merino as mentioned above the correction is locked in, and just the depth to be ascertained.

Crossbreds: A rise in prices will not occur while Merino prices are in correction mode, but hopefully we have weathered the worst of the conditions in the past six months and upside is not too far away.

- Bruce McLeish is Elders’ northern zone wool manager. 

The story Market correction drops EMI by 52c | Elders first appeared on Queensland Country Life.

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