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Aussie wool auction prices escalate substantially
Sep '13
Wool auctions in Australia continue to surprise and this week’s offering of 37,500 bales saw price levels escalate substantially. The bullish activity in sale rooms replicated, and in some type brackets exceeded, the previous series strong gains. The Merino sections of all types were the most affected with the current, apparently insatiable, appetite for these wools.

Whilst the Superfine end of the market remains in a positive growth trajectory, the real concentration of demand was firmly targeted at 19.5 and 21.0 microns. With supply currently running at 5% less than last year, and test data and anecdotal evidence pointing towards a significant fining up of the clip, there now appears to be a real willingness of both local and foreign buyers to lock in some future demand of types coarser than 19.0micron.

The 18.5 and finer end still appears to be being bought on a just-in-time basis. All wools remained well sought after right through to close with no signs of weakening.

The strength in buying is largely emanating from China, where large forward orders have been placed with traders and exporters for shipments ranging from prompt out to November, although very little speculative purchasing for the 2014 calendar year has been witnessed.

A major sell off of the greasy, top and yarn wool stocks that were being held in China for the past few months is rumored to have been completed or near so. Very little stock through the supply chain is now available for processors; hence the urgency and strong push from indent buyers representing that nation. Added to this volatility has been the pressure placed on exporters for delivery of contracted orders.

There now appears to be a common thought of the supply being oversold by buyers, particularly in the skirting, open top and carding areas. The short covering by forward positions in the market has exacerbated the situation and thus has caused larger than normal daily rises in price levels.

All Superfine Merino types were quoted at 60 to 75acents dearer by weeks end, with the exception being the lower/average types finer than 17.0 micron which held their ground well, but added only a few cents. Demand was firmly placed at the better end where some good Italian competition was added to the Chinese mix. The spinners types were again fetching premiums of over 100acents. Two large top makers (1 European, 1 Chinese) continue to purchase strongly in the superfine area, and unusually are concentrating on buying the better end of the selection.

The next few weeks will see auction offering volumes rise by 18% in volume to approximately 44,200 bales, as some of the previously held wool returns to the market and shearing is well in advance as the dry weather continues. Whilst demand is expected to be strong, a slight slowing may occur as buyers re-evaluate their financial and order book positions.

Australian Wool Innovation Limited

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