China economic crisis keeping pressure on wool market

While last week, prices bumped up by 15 to 30 cents across the various categories, the market remains tight with the Eastern Market Indicator sitting at 1131c/kg.

Growers are generally proving willing to take the prices being offered, with 89 per cent of the week's offering sold and and cleared to the trade.

Superfine wool is coming under pressure as the luxury market faces uncertainty in China, with 19- to 21-micron wool demonstrating the most resilience to price falls.

Southern Aurora markets partner Mike Avery said in the coming months the market could expect sporadic increases in demand causing small bumps in the market.

"We're not going to see a long-term move out of this cycle until we see an improvement in consumer sentiment and demand across the world, mainly focused on China and that might be well into the New Year," he said.

"Price has a way of correcting itself... we're not going to have a sudden turn off of the industry like we did when COVID hit, I think this will be sort of a steady state.

"If you look at it from a longer perspective, probably a 20 year perspective, we're probably in that middle band still.

"We'll probably go a little bit lower and demand will be sporadic, you've got to jump on it when it comes."

Mr Avery said the highs that wool prices got to during the 2018 to 2020 period may be colouring perspectives on the current pricing.

"There's certainly going to be prices that are nowhere near as good as they were two years ago but at levels that they were five years ago," he said.

"We're going to be affected by our major processing market and a significant consumer market sitting on their hands for a while.

"There is the opposite side of that coin, the US is appearing better, Europe's appearing better and that's where a lot of Chinese goods go, so that will keep kicking over."

Mr Avery said that the market would be stimulated again either when China comes back into a growth cycle or the Chinese government provides some stimulus.

"Where textiles lie in that, that's the million dollar question," he said.

"Are they going to stimulate the textile sector through a large military order for uniforms, or their public service for uniforms?

"They do move in big ways when they do it... when that is is anyone's guess."

Australian Council of Wool Exporters president Josh Lamb said it was hard to know how long the down cycle would continue.

"That confidence is not there with our customers for them to buy more wool and that's a direct result of the lack of confidence in consumers in China that just aren't spending," he said.

"It's not a wool-related issue at the moment, it's very much an economical one.

"From a wool market point of view I think we're probably through the worst of it but that's no guarantee of a quick fix to get back to better levels."

Mr Lamb said from a wool market point of view, the industry tended to have a better idea of direction towards the end of the calendar year.

"We've certainly heard bits and pieces about stimulus [in China] over the past six to eight weeks but it doesn't feel like that stimulus has been put out like it has in previous times when the economy's needed help... it seems to be a bit more of a piecemeal approach this time and a bit more targeted," he said.

"Even with that, you just don't feel like that's going to be enough for the average Chinese consumer to open their wallets.

"In July, August and September, it's very seasonal selling wool to China and those three months are the hardest three months of the year to sell wool, even when the market's good.

"When we're selling a bit of wool at the moment the feedback we're getting is there's no appetite for prices to rise at the other end.

"That means at the moment any little rise in the market will be short-lived... at some point that will turn, but there's no clear picture at the moment when that will be."