Price dips as Australian wool auction resumes this week

In US dollar (USD) terms, the results were significantly greater as the lower foreign exchange (forex) rate of the AUD versus the USD (-2.8 per cent) combined with the lower AUD physical market cut 7.1 per cent or 87usc off the US EMI to see that indicator close the week at 1135usc clean/kg.

"The fine / medium (19 to 22 micron) merino sectors suffered the greatest falls, which is indicative of the concern our manufacturers have of global demand as this type area is considered the predominant types of our largest customer i.e. China," Australian Wool Innovation Limited (AWI) said in its 'Wool Market' report for the week ending August 9, 2019.

"Pre-sale expectations of a struggling market were sadly fully met. Exporters reported from the outset of the selling week almost zero business had been written over the three weeks of the recess in sales. Minimal quantities of better specification types were sold into Europe and carbonized and cardings descriptions into China was about the sum of what business was said to have been done for basically the past month," the AWI report said.

"Whilst prices remain in the top section of percentile bands for 5- and 10-year comparisons for a number of descriptions, the situation at present is somewhat unprecedented. The Australian wool prices are almost entirely being adversely affected by issues away from specific wool industry factors. The year-long fall from the record EMI of 2116ac last August to today's 1676ac has been steady with just the odd dead-cat bounce giving slight hope throughout that period," the report added.

The Sino-US trade imbalance dispute continues to be the most quoted cause as to why the demand for wool has so rapidly gone off the boil. The dispute is having widespread influence over the global economy and all to the negative. Consumer and manufacturer confidence has pummelled and the utmost of caution prevails at present, the report says.

Risk-taking behaviour in the trading environment remains almost non-existent. Stock levels do remain extremely low throughout the greasy wool chain, but with the speed of the price demise, buyers will remain reluctant to enter into stock taking until clearer demand signals emanate from spinners, weavers and other manufacturers.

On the supply side, the drought continues to bite hard across much of Australia’s wool growing areas. Test figures from AWTA show the initial downturn in production, with expectations of a far greater loss as the season progresses.

A Chinese top maker, Australia’s largest two traders and the leading carbo and carding manufacturer dominated the auction scene this week. In fact, almost 40 per cent of the merino fleece that was sold was purchased by the top two buyers.

There will be 43,603 bales scheduled for auction at the sales next week. (RKS)

Fibre2Fashion News Desk – India