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Variety of Indicators Show Positive Wool Picture

01 June 2015

GLOBAL – Australian wool sales and Chinese acceptance of current market levels are reasons for the wool industry to be optimistic.

This is according to Australian Wool Innovation latest reports which has charted a “recent rapid rise” in wool prices and is confidence about Chinese demand offering support in the future.

Last week’s Eastern Market Indicator closed at a four year high of 1312 ac per clean kilo, 26 per cent higher year on year.

This year’s International Wool Textile Organisation congress at Zhangiangang, China, reported a positive tone. Stocks are low in China, and while European processors have shown “some reluctance” to current prices wool trader John Roberts of Eubinal Pty Ltd said he saw no reason why prices should head south any time soon.

Addressing delegates, he said economic reforms in China appear successful.

Furthermore, the auction pass-in rates are suggesting strong demand in the Australian market. At 2.8 per cent, the rate has been at its lowest since the demise of the stock pile in 2001.

Commenting on this figure, AWI said: “Auction pass-in rates can reflect many things, but in its simplest sense, it reflects the strength of buyer sentiment versus that of the seller.

“If the sellers aren’t receiving the price signals expected, pass-in rates tend to rise, and vice versa.

“High pass-in rates reflect absence of buyer interest, and low pass-in rates reflect strong buyer interest.”

Looking ahead, 26,000 bales forecast for sale volume in Australia next week. AWI described last week’s placement of 37,000 bales as a “small offering” and is expecting buyer pockets to be tested next week.

All types and product descriptions “appreciated greatly”. Notable Merino fleece wool gains were reported.

“The weak AUD helped the Chinese indent buyers immensely and they fully utilised the 2.5 to 3 per cent week on week advantage in currency,” added AWI in its weekly update. “The short to medium expectation of a relative shortage in global wool supply has triggered much of the activity, as stocks in most sections of the supply chain have been allowed to run dangerously low.”

Michael Priestley