Volume delays price recovery

31 Aug, 1999 03:52 AM
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A WOOL market recovery has been pushed back a month to late October-early November, after a spring flush of fleece has come on to the market. In the next six weeks, more than 500,000 bales will be offered at auction throughout Australia, the equivalent of 20 per cent of the total offering last season. But information and trade policy manager Chris Wilcox believes all indications are right for the market to firm once it gets through the spring flush. "The large volume of offerings are certainly testing the market and it will depend on how long it lasts for," Mr Wilcox said. While surprised by the magnitude of the spring flush, Mr Wilcox did not doubt the recovery was still on track. "I am still pretty confident about that," he said. Mr Wilcox said the activity in the Asian combing market was helping to underpin the large offering in the market, although more support was required, "We really need the combing (throughput) in all three regions (including Europe and the US) to have a lift in the activity needed to see a sustainable recovery," he said. According to Woolmark's latest business survey for the June quarter, combing activity has lifted in Japan, Korea, Taiwan, China, India and Australia. Woolmark's Monthly Market Briefing publication reports business conditions in Japan, Korea and Taiwan are expected to remain positive for the September quarter and to continue to improve beyond that period. However, the recovery is from a very low base and volumes may be restricted. In China, combing activity is expected to lift sharply next quarter, behind one of the strongest outlooks for orders in some time due to pent up demand for wool to fill recently released quotas. Woolmark says the rise in activity should help clear wool stocks held for quota, but once completed, raw wool markets should see some short-term improvement in demand from China. But Western Europe is still struggling with high stocks, particularly in worsted weaving yarns, and excess capacity. Woolmark suggests raw wool demand will probably remain "hand-to-mouth" in this region into the September quarter. As a result, a sustained market recovery still appears to be some way off.

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