Prices plummet 9.7% at Australian wool auction this week

"A total lack of confidence, brought on by the slowing global economy, saw the majority of buyers desert the local auction markets. No sector was left untouched as prices plummeted from the outset. Quite incredibly it was this same sale last year that the Australian wool market hit the record EMI of 2116ac," the Australian Wool Innovation Limited (AWI) said in its 'Wool Market' weekly report for sale week 7 of the current season.

In AUD terms, the EMI last traded around the 1513ac level at the end of September 2017(1522ac). The AUD EMI has traded above the 1513ac mark for 23 of the past 30 months (77 per cent of the time) since March 2017. The EMI has averaged 1783ac during that 2.5 year period. Prior to that, the 2.5 year average (August 2015 to Feb 2017) EMI was 1222ac. The 5-year average AUD EMI is 1496ac or 17ac below the price of EMI on August 16.

In USD terms the decaying demand is more starkly evident. The current USD EMI of 1026usc last traded around that number in January 2017 (1032usc). The USD EMI has been above the current EMI for 32 months of the past 3 years, (89 per cent) which has seen that indicator average 1265usc during that period. Prior to that, the 2- year average was 913usc. The 5 year average USD EMI is 1126usc or 100usc above the current EMI.

The pre-sale sentiment was massively negative, during the week ending August 16. Just minimal carbonising orders were still available but at reduced rates and the odd European types were needed, but overall demand for the standard China types was practically nil, the AWI report said.

The Sino-US trade imbalance dispute and to a lesser degree Brexit have been the dampeners on the mood of the global economy, but this week saw the emergence of recession in the US talk as the inverted bonds yield issue came to the fore. Consumer and manufacturer confidence continue to take a hammering and most have taken flight to safety and are sitting on their hands (and money).

The auction scene saw the superfine merino (finer than 18.5mic) fleece types dip by 150ac whilst the broader merino fell by up to 200ac. Skirtings were also 150 to 200ac cheaper as were the crossbreds. Cardings were the least affected and dropped 30ac for the week. The tone of sale rooms was dreadful, with just three or four companies participating within the type categories. The two largest top makers plus two traders were picking off the majority of the sold lots but significantly 35.8 per cent was passed in and 16.7 per cent was withdrawn prior to sale, representing over half of the original scheduled volume failing to meet the price expectations of the sellers.

Next week auctions will take place at only two places—Melbourne and Sydney—instead of the usual three places, and 33,696 bales will be up for grabs. (RKS)

Fibre2Fashion News Desk – India