Australian Wool sales -AWI Commentary 3 February 2023

Australian wool auctions this week resulted in price gains on all types and descriptions. Strong interest from most offshore interests for prompt and close shipment provided the initial drive for the market. The subsequent price rises saw those same buyers follow the prices upwards and gave auction buyers and exporters the necessary confidence to acquire further inventory. Funds permitting, this enabled most operators to stay in the market after forward risk had been covered right through to the conclusion of selling. 

Chinese businesses were where the strongest enquiries came from, but Indian and European interests also showed willingness to support the market at the ruling price levels. The smaller offering was somewhat unexpected given the large testing figures through the previous month (see below) and perhaps accentuated the expected gains to a certain degree. The more advantageous forex rates (around 0.5%) available also helped push AUD levels higher at auction. Most new business written was for Merino fleece and skirting types which was highlighted by the 2.4% gain placed on the WMI value in the predominantly Merino-only selling centre at Fremantle WA.

Whilst access to skilled and unskilled labour is a global problem in textile factories (and almost all industry and services), the indications from all wool destinations is that production levels are at or are close to returning to pre-pandemic levels for quite a few of the significant buyers of Australian wool. Inflation rates globally and the extreme energy prices (more affecting in Europe) continue to be a major hindrance, but the intentions of the majority of manufacturers to resume normal activity in wool textiles is being signalled, both anecdotally and perhaps by the improved demand at auction.

The Merino wools of all types were sold to levels around an average of 45ac better. A widening gap is becoming apparent between the better and poorer specifications. This week, the 45ac gains were made up of the better types being 60/65ac dearer and lower types around 20ac dearer.  Crossbred wool types managed a small 5ac rise and cardings achieved a 15ac pus. Once again, the largest of the local traders and first stage processors dominated buying over all the sectors.

Next week has 51,000 bales available selling on a Tues/Wed/Thurs auction rotation.

Source: AWI