Australian Wool Auction 31 October 2024 – Commentary from AWI

This week’s Australian wool auctions sold definitively to the buyers favour. Both the local auction price and the major foreign exchange (forex) rates available headed downward, giving a cumulative price benefit for the overseas wool users converting their local currency into AUD for wool purchases for the week. At times, this forex rate went over 2% to their advantage on top of the 0.5% reduction in the AUD EMI.

The US Dollar (USD) is gaining strength against the AUD. Positive US economic data from last week is indicative of resilience in the economy. This movement supports the overarching sentiment of there being another nominal interest rate cuts by the USA Federal Reserve in November. 

As the Australian dollar (AUD) value retreated, blame is being apportioned to the ongoing uncertainty ahead of US presidential election. Either way, this reduced AUD value certainly aided in the wool auction prices being held up this week, somewhat shielding sellers from lower levels at auction and masking the weaker demand scenario for wool traders, buyers and manufacturers.

The current activity at auction appears to be signalling that the much awaited for recovery in the European and Chinese domestic consumption markets remains elusive. The purchasing weights for the usual Euro orders seem to be way off the pace, with reduction of built up stocks at all levels beyond the greasy stage the current modus operandi. Chinese buying has now appeared to have largely reverted to a higher percentage of machinery demand

Traders to China, Chinese based top makers and Chinese bound indent orders evenly distributed buyers lists this week. Buying for other destinations was very difficult to isolate or evidence in the auction rooms. 

As is often the case in weak demand sale weeks, as the wool prices in USD and CNY terms dropped over the 2% mark on week on the  week to week comparison on Wednesday, the first stage manufacturers kicked into a higher purchasing mode. Their buying was the most dominant towards the close of selling as the buying indents and forward contract commitments appeared to have been met for the week.

Next week has around 38,000 Australian stored bales on offer, but Melbourne will sell on Wednesday and Thursday, whilst Sydney and Fremantle will remain to their usual Tuesday/Wednesday selling days.

Source: AWI