Fine wool premiums down amid continued market depression

With the Eastern Market Indicator declining to 1142c going into Easter, higher price point wools are continuing to be particularly affected by the subdued market conditions.

According to Australian Wool Innovation analysis of the market in recent months, producers of 17-micron fleeces can expect a little over 300c premium compared to their broader counterparts, down by about $5 from the 800c premium they were receiving a year ago.

Meanwhile producers of 19 micron wools haven't received any premiums compared to 21-micron wools in the past six months.

With almost 52 per cent of all Australian wool marketed measuring below 19.5 microns according to AWEX data, the loss of premiums would be having widespread impacts on producers.

Southern Aurora Markets partner Mike Avery said with the global economic downturn causing a decline in discretionary spending, it was natural that wool, particularly in fine categories, was being affected.

"You've got to appreciate the pipeline... they want to keep workers and machinery going," he said.

"The cost per kilogram of input is fairly important to that and it's the same thing at the other end in the delivery of a product.

"They want to still have wool on the shelves but maybe they choose a blend rather than a pure wool or they look at a coarser micron.

"You're always going to see when prices soften that the premiums close faster on the fine end."

Mr Avery said while China is the manufacturing hub for woollen products, they are also a big consumer of Australian wool.

"The consumer there is quite conservative at times, they will lock the doors, so to speak, as far as spending is concerned," he said.

"The Chinese economy hasn't really felt the ups and downs the world has felt, it's been growing at double digits for that long so it's a bit of a shock that their real estate sector and other sectors are, at best, not growing, and at worst, coming off a bit."

Endeavour Wool Exports managing director Josh Lamb said the majority of fine wool purchased by China was typically exported onto other countries either as tops, yarns, fabrics or as garments.

"While we need the economy in China to improve, we need the export markets out of China to America and Europe to improve to help fine wools," he said.

"China's domestic market is principally an 18.5 micron to say 21 micron consumption for Merino... we rely on export markets out of China to drive that fine wool price and those markets at the moment are completely flat.

"Back in September or October we were hoping there would be some improvement around March or April, but that hasn't materialised at all.

"If anything conditions have probably got a little bit worse."

Mr Lamb said he didn't expect to see any sustained rise in the market until after the Northern Hemisphere summer.

"The levels we're at at the moment, you can't see much more downside and our customers certainly recognise that the price of wool is very attractive," he said.

"The reason why they're not buying more is demand's not there... going into next season if things do improve economically around the world, then the market could be in for a good year."