Wool’s historical record rally

Record rally closes wool market’s ‘extraordinary’ year


Wool
Shearers Jess Patterson and Cynthia Southwell, "Box Hill", Rye Park, and rouseabout Clare Hanson, Yass, shearing at "Clanmarra", Bowning.

Shearers Jess Patterson and Cynthia Southwell, "Box Hill", Rye Park, and rouseabout Clare Hanson, Yass, shearing at "Clanmarra", Bowning.

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More than $3.1 billion worth of Australian wool has been sold at auction this year, closing on a record breaking run of high prices.

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More than $3.1 billion worth of Australian wool has been sold at auction this year, closing on a record breaking run of high prices.

It marks the highest value of wool sold in a calendar year in Australian Wool Exchange’s (AWEX) 23 years managing wool auctions.

With the AWEX Eastern Market Indicator (EMI) closing 405 cents a kilogram above the same time last year - representing a 30 per cent jump - AWEX senior market analyst Lionel Plunkett said it had been a year for the record books.

The closing rally cracked an apparent 1700c/kg glass ceiling to finish at a record EMI of 1760c/kg, prior to the market’s three week recess.

The EMI’s 2017 performance represents the largest surge in 15 years, increasing 701c/kg in the past three years.

The final selling week’s rally broke several new records and resulted in price increases from 40-90c/kg week-on-week.

Driven by strong demand from China, new price records were set from 21 to 25 micron, with the top price at 1753c/kg.

The largest increase was for Merino cardings, which increasing 26pc in the past six months to set a new price peak at 1529c/kg. 

The final trading surge has been attributed to mills that were still in need of raw wool to fulfill orders in the new year.

Above average volumes were offered for the last nine weeks, showing growers were getting as much wool on the market as possible.

However the price rise put a financial squeeze on exporters, with reports of buyers’ finances, in some cases, at their limit in recent weeks.

“China buyers were aggressive in the lead up to Christmas and because of these prices, no supply has been on hold with growers, exporters or topmakers - it is going liquid through the system,” Australian Merino Exports (AME) director James Thomson said.

“In the shortterm, the market will strong until February, after Easter it is difficult to read.

“I do see risk on that finer edge where the market has been rallying on a full run for the past 12 month.

“When the music stops, the correction could be twice as quick.”

He said any small correction should not be perceived as a disaster considering the current prices.

“While a correction won’t happen in the short-term, everyone is mindful that when the market turns the other way, it is going to be a major risk for some exporters,” Mr Thomson said. 

Techwool Trading retained its top position as the country’s major exporter, with 246,161 bales, representing 14pc of the auction volume, followed by Fox and Lillie with 188,831, or 11pc of the market.

AME climbed the ranks, rising from fifth to third largest exporter this year, with 139,939 bales traded, or 8pc of the market.

“A year ago we thought finewool was undervalued so we positioned ourselves aggressively in that market,” Mr Thomson said. 

“When we sold one order, we bought two, and proactively pushed ourselves into the superfine market.

“We’re doing a lot more of the specialty types, mainly non-mulesed and ceased mulesed orders, from Europe and Japan.​” 

Nearly 1.8 million bales were sold at Sydney, Melbourne and Fremantle auctions this year, a 5pc increase on last year’s sales, with 140,735 bales passed in.

Australian Wool Testing Authority has tested more than 160 million kilograms this season, compared with 152.5mkg for the same six-month period last season.

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