Australian Wool Market (26 May 2022) – AWI Commentary

Prices at Australian wool auctions this week submitted somewhat to the weakness that crept into the market last week.  The losses were minimal though as the major Chinese top makers and carbonizing machinery owners stepped up their operations to secure supply and dominated their respective sectors. Trading houses were not as keen at the commencement of selling as they sought market stability in foreign exchange to buy/sell in a less risky environment. By week’s end though it became apparent that their rates of purchasing had lifted and the stiffer competition led to the market closing on a reasonably sound footing.

The Eastern Market Indicator (EMI) dropped by 1% to 1420ac/clean kg for the week which was offset exactly by the stronger (+1%) AUD v USD foreign exchange (forex) rate movement. This saw the USD EMI wool price remain unchanged at the 1009usc/clean kg mark. The Western Market Indicator (WMI) peeled back 11ac or 0.7% to a closing basis of 1504 ac/clean kg in a week in which that indicator held against the downward pressure of the forex applied. 

With the slight falls in the auction market prices, the national clearance rate also dropped down to 86%. This non-acceptance of the current spot prices was heavily accentuated by the relatively high passed in rate of 19.6% of Merino fleece in the WA centre and the national crossbred wool type selection failing to clear 24.9% of what was offered. Noticeably almost 34% of the crossbred wool type offered in Sydney failed to meet the grower reserves.

Despite wool values lagging slightly this week, underpinning the relatively stable market was the type of buyers topping the lists. When wool is flowing at volume to the first stage manufacturers, that gives the market a good dose of confidence that wool is being priced correctly. Subsequent trading can then place further competition into the room. Some of the first stage users buying activity this week on the skirtings and oddments was the strongest seen for quite some time.  

Next week, volumes drop substantially to slightly over 37,000 bales rostered to sell, over two days. Note as well that in a fortnight, the Fremantle centre will not be operating and current estimates sees just over 31,000 bales available to the trade that week. 

Source: AWI