Cheaper South African wool pulls down Australian prices

The declining overall quality of wools available, soft enquiry and a slightly stronger Australian dollar (AUD) against the US dollar (USD) and the Chinese Yuan (CNY) were other factors that resulted in a drop in prices. All wool types and descriptions were affected to varying degrees during the sale week 37, according to the ‘Wool Market’ weekly report released by Australian Wool Innovation Limited.

On Wednesday, the Port Elizabeth auction saw the Cape Wools Merino Indicator decrease by 3.3 per cent, due to a ban on South African wool entering China. The reality of the ongoing ban on South African wool entering China is that there are plenty of FCLs (full container loads of between 108 and 140 bales each) of South African wools either delivered into CMP (Chinese main port), on the water to China, or being packed and bales bought and in brokers stores remaining in the buyers inventory with no payment forthcoming.

“The longer the ban continues the worse it will get. These buyers will now have to liquidate these wools into other markets and now at prices much lower than what they paid, if they hadn't already managed to reassign these deliveries. Obviously, this has, and will continue to affect the spot auction results in the immediate term,” the report said.

South Africa is now very reliant on wool exports to China, with 70.6 per cent of the South African clip estimated to be going there (very similar to Australia). China is a relatively new participant in the South African market with less than a decade of dominant buying activity. The production in South Africa is equivalent to around 14 per cent of what Australia produces.

There are over 44,000 bales rostered to sell at the auctions next week. “The lower quality wool types and descriptions remain dominant in offered volume and are getting harder to place into exporter orders, but this week did see some stronger interest from the top makers as the gaps widen between the better and average lots,” the report added. (RKS)

Fibre2Fashion News Desk – India