AWI Commentary Australian Wool Sales (25 May 2023)

The lower volumes at Australian wool auctions this week could not arrest the current downward trend. All types and descriptions on offer were affected and from the outset, buyers were apprehensive to fully participate causing prices to depreciate throughout selling. The merino segment was mostly affected with crossbred wool and carding types not as impacted. 

Confidence has been lacking the past few weeks. That direction feeds upon itself, accentuating the current “feel” buyers are getting. An obvious, clear direction from overseas trading partners is not forthcoming presently thus creating the reactionary price behaviour. 

The highlight from the week’s activity came from China’s largest top maker, who maintained – and in fact increased – their usual weekly percentage of purchases, particularly within the Merino fleece sector. The approach they have shown should incentivise others that maintenance of supply at the first stage is an essential ingredient to being a strong participant in that area of wool manufacturing. 

Defying the current greasy wool auction results, apparel sales in the USA, Germany, South Korea, Italy and France continue to rebound and are well above 2022 levels and also topping pre covid influenced years. Unfortunately our most traditional and voluminous suiting market in Japan is not. In China, retail garment sales have continued their strong rebound with both March and April 2023 sales well above the 2022 numbers and are now above pre-pandemic levels. This continued growth is vital to wools ongoing fortunes.

Despite the recent price degradation, the presence of a consistent demand is a promising longer term signal. Containers are still freely flowing to manufacturing destinations. This indicates that upstream users continue to recognize the value and benefits of our product but the spot price is struggling as a clearing of the backlog of the supply chain, particularly at greasy and wool top level, is undertaken.

There are 47,000 bales on offer next week, with sales being conducted over 3 days, Tuesday through to Thursday. 

Source: AWI