Glimmer of hope at week's first wool sale in Melbourne

EMI jumps US47c as hope returns to ailing wool market

Wool
GLIMMER OF HOPE: The week's first wool auction in Melbourne provided some hope as wool prepares for another testing week.

GLIMMER OF HOPE: The week's first wool auction in Melbourne provided some hope as wool prepares for another testing week.

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Last week's crash in wool prices was halted when this week's wool auctions resumed in Melbourne.

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Australia's first wool auction under strict new coronavirus rules in Melbourne on Tuesday showed some glimmers of hope for the market.

The good news was the benchmark Eastern Market Indicator lost only five cents a kilogram clean to finish on 1433c and gained 47c in American dollar terms to climb almost 6 per cent to US848c

The big test will come on Wednesday when Fremantle and Sydney will start their week's sales with a national offering of 18,919 bales scheduled for auction.

More than 19pc of the Melbourne offering of 8291 bales was passed-in.

The Melbourne auction rooms were relocated to the show floor and dining room to help protect those in attendance from Covid-19.

At the close of selling 19 micron and finer Merino fleece wools gained 5-10c while 19.5 micron and broader maintained the earlier losses of 35-40c.

Merino skirtings rose overall by 10-20c while well-prepared crossbred wool increased by 5c across all microns.

Wool had a horror time last week when the EMI shed 83c, the biggest weekly fall since last October.

Mecardo analysts Robert Herrmann and Matthew McAdam said not even a collapse in the Aussie dollar to as low as US55.7 could halt the slide in the EMI. In US dollar terms, the EMI lost 181c to finish on 801c.

Executive director of the National Council of Wool Selling Brokers, Chris Wilcox, said the wool market had finally succumbed to the coronavirus pandemic but also provided a note of optimism.

"I've been talking to my contacts in China over the past week and they say life is starting to return to 'normal' after the Covid-19 epidemic there.

"This 'normal' life includes mandated requirements to wear masks in public and in offices, no air conditioners and regular and constant temperature checking of everybody as they move around the cities.

"They also tell me that mills are coming back into production (including in Wuhan, the epicentre of the pandemic). This is good news and hopefully will bring increased orders from mills keen for raw wool.

"However, elsewhere around the world we are seeing the opposite as cities, states and countries close down. It is the longer-term economic impact that is of particular concern.

"Everything would need to go right with both fiscal and monetary policy for countries and the world to avoid a significant recession," Mr Wilcox said in his weekly newsletter.

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