Buying flurry marks the start of wool sales

By Mal Gill
January 19 2022 - 11:00pm
A lack of 19-21 micron fleece offered at eastern selling centres could favour WA woolgrowers

SECOND highest weekly number of bales sold so far this season marked the return of live wool auctions at the Western Wool Centre (WWC) last week after a three-week Christmas-new year recess.

Eighteen buyers paid out just over $14.4 million for 8209 bales out of a total of 9016 bales on offer in week 28 of the current wool selling program - the opening week of WWC sales for 2022.

Advertisement

Ad

The passed-in rate for the week was 9 per cent.

Only during the first week of the selling season last July were more bales sold at the WWC - 9721 out of 11,421 offered, for a passed-in rate of 14.9pc.

The Western Market Indicator (WMI) added 31 cents for the week to finish at 1439c per kilogram clean, its highest level since the end of week two of the selling season, back in July.

WWC Merino fleece price guides across the 18-21 microns market segments added between 15c (21 microns to 1320c/kg) and 52c (18.5 microns to 1887c/kg) and the Merino cardings guide put on 34c to finish at 908c/kg.

While the market tended to "get a bit sloppy" - as one major buyer put it - late on the second of the two trading days of the opening week of the year at the WWC, there were signs a positive market may continue this week and beyond in the lead up to Chinese new year on February 1.

New year celebrations and annual holidays are expected to shut down China's industry, including woollen mills, for 7-10 days from February 1, but the return to work after that usually marks the start of a period of relative stability for suppliers of raw materials to China as its industry attempts to catch up on the holiday backlog.

The same major buyer who noted slop in the market towards the end, also pointed out there appeared to be a shortage of Merino fleece wool coming onto markets over east, particularly at the Melbourne selling centre and particularly in the 19-21 micron range which is the mainstay of Australian wool exports to China.

He pointed to a higher than normal percentage of crossbred wools in Melbourne wool brokers' catalogues last week, compared to the usual offerings at this time of year.

At the WWC last week, Merino fleece comprised 64pc of the offering, according to Australian Wool Exchange (AWEX) data.

It comprised only 42pc of the Melbourne selling centre offering and only 44pc of the Sydney selling centre offering, according to AWEX.

The Merino fleece percentage of offerings at Melbourne and Sydney for week 24, the final trading week before the three-week recess, also seemed unusually low.

A lack of 19-21 micron fleece offered at eastern selling centres could favour WA woolgrowers, the buyer pointed out.

While the WA wool market did soften towards the end, the Melbourne selling centre traded on its own on the following day - for a third day last week to clear the holiday stockpile - and prices there continued to firm, indicating wool demand had not been fulfilled on the two normal trading days around Australia.

As a result, indicative WA wool prices across the 18-21 micron spectrum have fallen significantly behind Melbourne prices and, apart from the 18.5 micron Merino fleece sector, to a lesser extent now also trail Sydney prices.

For example, 18 micron Merino fleece bought at the WWC towards the end of last week's trading was 78c/kg cheaper than 18 micron Merino fleece bought the following day in Melbourne.

WA's 20 micron fleece was 50c cheaper than Melbourne's and WA's 19 and 21 micron fleece was 43c/kg cheaper,

These discounts at the WWC add up to significant savings on a 185kg bale multiplied by between 1300 and 1600 times - which is the number of fleece bales the major buyers each purchased at the WWC last week.

Advertisement

Ad

At that discount level, potential weekly cost savings of more than $230,000 buying 18 micron fleece wool at the WWC rather than at Melbourne, probably explains why Australia's largest national wool trader, Techwool Trading, topped the WWC buyers' list last week.

Largest local trader PJ Morris Wools was second on the buyers' list.

But buyers for Chinese indent companies kept a low profile or were absent last week.

However that is not unusual, market observers noted, with buyers for China preferring to watch how the market returns the first week back after a recess rather than to participate.

Tianyu Wools, the largest indent buyer which normally vies for a place near the top of the WWC buyers' list, purchased only 530 bales last week at the WWC and Chinese-controlled Lempriere Australia did not buy a bale.

Another Chinese mill supplier, Meliwa, was not in the WWC sale room last week, with its veteran buyer Alan Brown understood to be still on holidays and teasing fish at Denmark.

Advertisement

Ad

This week the WWC will again offer a similar number of bales, while the national wool offering is expected to grow by 2794 bales to 46,533.

The Melbourne selling centre will again trade an extra day.

Next week, the WWC will close for Australia Day on Wednesday and trade on Tuesday and Thursday.

Want weekly news highlights delivered to your inbox? Sign up to the Farm Weekly newsletter.

Get the latest Western Australia news in your inbox

Sign up for our newsletter to stay up to date.

We care about the protection of your data. Read our Privacy Policy.