Wool market indicator gains 49c | Elders

Wool market indicator gains 49c


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PRICE RISE: A firm tone ended up adding 49c to the wool market indicator in both local and US dollar currency.

PRICE RISE: A firm tone ended up adding 49c to the wool market indicator in both local and US dollar currency.

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A firm tone ended up adding 49c to the wool market indicator in both local and US dollar currency.

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MOST pundits expected a firm market in Australia during the past week, but not many could honestly say they expected it to be quite this strong.

Such is the way when supply is shrinking and there are limited opportunities to purchase the correct specification wools, and exporters, traders and processors are nervous about covering their sales position immediately.

A firm tone ended up adding 49c to the market indicator in both local and US dollar currency. In Euro terms the increase was slightly lower, but still a significant 38c rise for the week. All types and micron groups were affected by the buyers need for quantity this week with superfine Merino increasing by 30-50c, and the medium sector jumping by 50-70c as buyers were forced to push the specification boundaries to the very limit. Carding wools by comparison were a little more subdued with 5-15c increases except in the west where a very small selection saw prices jump significantly.

Crossbred wools were the standout performer of the week with gains of more than 50c common across the nation and across the micron spectrum.

AWEX’s northern market indicator closed up 35c on 1881c. The 17 micron indicator closed on 2768c, 18 micron 2355c, 19 micron 2088c, 20 micron 1981c, 21 micron 1952c, 28 micron 926c, and 30 micron 674c.

Crossbred wools were the standout performer of the week with gains of more than 50c common across the nation and across the micron spectrum. - Bruce McLeish

The April/May period for the wool market is often volatile, and this year is proving to be no different, although there is not the aura of pessimism that often comes with such volatility. In general the early stage processors are happy to continue to re-stock their positions, which have now run down a little, and their market position has been favourable enough over the past few months that many perceive they can do no wrong.

The increase in combing machinery in China this season from closures in other parts of the world, and reinstallation of previously mothballed machines will test this philosophy in the near future. Not only is there a challenge gaining access to enough raw materials particularly with the deteriorating seasonal conditions in the biggest supply market, but also tightening financial conditions to allow the goods to be funded.

Exporters in Australia or elsewhere are certainly not in a position to increase the funding limits or payment terms for the greasy wool, and spinners are pushing hard to maintain the payment conditions they already get. Stuck in the middle are the topmakers or carbonisers who have traditionally been the bankers for the textile pipeline, and this will not get any easier given Chinese bank’s reluctance to fund textile operations.

The potential trade war between China and the US has yet to be officially launched, and textiles have not yet been implicated directly. But should tensions increase further and more disruptive barriers be erected it will only make finance more difficult to access.

The length of the Merino pipeline and the time it takes to transform each stage necessitates a delay between purchase at one stage and delivery and payment to the next in line. Growers in Australia actually enjoy some of the fastest, most secure payment terms in the whole textile pipeline, to the envy of many.

So what is causing the market to be more positive than negative at present? The European fraternity are largely tidying up their order books, only purchasing small amounts of raw material to finish off their orders in what remains a traditional seasonal mode of business. They will largely wait for the early indications from the next round of exhibitions in July before making plans for the new processing season. Asia however, dominated by China is tending to be more trans-seasonal and beating to a different drum.

Fake fur was the sensation last season that caused an out-of-season jump. At present there seems to be a lot of yarn and fabric stock of this product left over from the over zealous production runs last year, but this product is being converted into lighter weight, new fashioned items, which if successful could re-invent the fake fur appetite again.

Alpaca fibre is in short supply across the globe and now the textile trade has re-created fake Alpaca this season to alleviate the shortage. This product is being made from crossbred wool, and it is gaining popularity – hence the sudden increase in prices over the last three weeks.

Double Faced fabric remains a popular item in the Chinese fashion wardrobe also, and this should ensure the carding sector remains buoyant for the next few weeks.

The underlying traditional Asian uniform market also rolls on, albeit with a touch more polyester than last year, but with slightly relaxed government purchasing policies now in place, this segment is continuing to provide a base-load of demand generation for the worsted or merino fleece sector.

While any of these items may be ‘switched off’ at any point, and the whole trade is still nervous enough to not trade above ‘the line in the sand’ provided by the futures market next week at least looks positive. Even if the futures market does eventually turn out to be correct a 21-micron price of 1750c for the spring will be a pretty handy starting level for the new season.

- Bruce McLeish is Elders’ northern zone wool manager. 

The story Wool market indicator gains 49c | Elders first appeared on Queensland Country Life.

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