China puts brake on market

China puts brake on wool trade


Market Analysis
Eyes on exports: ACWEP president Matt Hand said the rapid wool price fall was due to China being less active in the trade, however forecasts this to stabilise soon.

Eyes on exports: ACWEP president Matt Hand said the rapid wool price fall was due to China being less active in the trade, however forecasts this to stabilise soon.

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WOOL prices spiralled further south this week, as Chinese buying support went missing.

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WOOL prices spiralled further south this week, as Chinese buying support went missing.

The Eastern Market Indicator has lost nearly 150c/kg in the past fortnight, closing trading at 1874 cents a kilogram after losing 4.8 per cent last week.

Australian Wool Innovation said a lack of new business for Chinese exporters has created the dip in demand, as manufacturers had been finding it hard to pass on high wool prices to retailers.

Brokers obviously saw it coming as there were originally 37,161 bales drawn nationally, but only 33,371 bales offered – marking a 7pc fall in the scheduled offering.

Those producers that did put their wool forward weren’t keen to take home the rates being offered, with a massive pass in rate of 22.6pc.

Again it was either end of the spectrum which felt the fall the most, with 18 micron and finer wool losing between 108c/kg and 165c/kg in both Sydney and Melbourne, while the Merino Cardings indicator dropped on average 138c/kg, after already falling 100c/kg the previous week.

Despite the downward trend, the Australian Wool Industries Secretariat market report pointed out the EMI was still 296c/kg above the same selling week last year, while in the west the market indicator was 399c/kg higher.

And they expect to be close to 19pc less supply offered at the next three sales compared to the same period in 2017.

But Australian Council of Wool Exporters and Processors president Matt Hand said while it was expected the next supply forecast would be in the region of 15pc less, limited supply didn’t always equate to a strong market.

“The main driver (of the falling market) is the fact the Chinese have been very inactive…really since September they have been pretty much out of the market,” Mr Hand said.

“(Although) having said that they are not carrying much stock so we can be reasonably confident they will have to re-enter the market at some point – it is just a matter of when.”

He said the high pass-in rate showed growers were reluctant to sell at rates discounted from what they were seeing a fortnight ago, but price resistance was a two way street.

“After four years of pretty steady price growth, eventually and inevitably there has been some resistance to high prices and perhaps labels have resisted putting too much wool into their lines because it was more than they could afford,” he said.

“However the weakness of the market really is because of China and we don’t expect that to continue long term  - whether it recovers to the levels we saw couple of months ago is unknown but the strength will come back soon.”

The New Zealand Merino Company were also not willing to sell the 1151 bales they offered through the Australian Wool Exchange in Melbourne on Thursday at the lower rates, passing in more then half of them. 

The story China puts brake on market first appeared on Stock & Land.

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