LOCAL brokers and buyers are waiting with some trepidation to see whether two major international developments last week may have yin and yang impacts on prices and demand for wool.
The consensus view is the immediate removal, under the interim Australia-India Economic Co-operation and Trade Agreement (AI-ECTA) signed on Saturday by Federal Trade Minister Dan Tehan and Indian Commerce and Industry Minister Priyush Goyal, of a 2.5 per cent customs duty on Australian wool imported into India, will have a positive impact.
In the July-January first half of the current wool selling season, according to Australian Wool Exchange (AWEX) figures, 8.2 million kilograms of greasy wool sold at live auctions at the Western Wool Centre (WWC) and Melbourne and Sydney selling centres was exported to India.
On volume, this made India our third best customer taking, in rounded figures, 5pc of wool exports, according to AWEX.
Those figures put it behind China (142.2mkg, 78pc) and Italy (9.6mkg, also 5pc rounded according to AWEX) and ahead of the Czech Republic (7.4mkg, 4pc).
Brokers on Monday agreed the removal of customs duty making Australian wool cheaper for Indian processors has potential to benefit typical WA Wheatbelt woolgrowers who produce 20 or 21 micron Merino wool, more than woolgrowers who produce superfine wools which already enjoy relatively strong demand and better prices.
Anything that gave them a chance to clear some of the stockpile of broader wools now filling many woolstores, accumulated due to more targeted selective purchasing by buyers during the pandemic, was welcome, brokers said.
WA woolgrowers producing crossbred wools might also benefit from a much-need increase in demand for their wools as a result of the Indian duty removal, they said.
But veteran wool buyer and exporter Peter Scanlan of Peter Scanlan Wools was cautious about the short-term impact of the AI-ECTA tariff cuts.
He pointed out while 2.5pc duty was removed from wool, the AI-ECTA also immediately removed a 30pc tariff from Australian lamb and sheep meat imports into India.
"I think the (Australian) sheep meat industry is the big winner with this trade agreement," Mr Scanlan said.
"I wonder how many woolgrowers will weigh up the option to sell sheep to take advantage of good prices and what effectively is the opening up of a new market in India without the 30pc tariff."
While Australian wool already comprises 13pc of India's annual imports, India has only imported 111 tonnes of Australian sheepmeat in the past five years, so the sheepmeat industry is confident the tariff removal will trigger significant interest in its products.
The second international development likely to impact the local wool market was China's biggest port city of 26 million people, Shanghai, being locked down for 10 days from last Friday as it battles to control a COVID-19 Omicron variant outbreak.
The Chinese government last Thursday abandoned an earlier two-phase plan which saw half of Shanghai shut since Monday last week and would have seen that half reopen this week and the other half close for four days, to minimise commercial disruption.
Instead, both halves of the city were locked down, including the port of Shanghai which is the world's busiest container port, causing further disruption to an already chaotic global shipping situation.
Caught out by the sudden lockdown, about 300 ships are said to be anchored off Shanghai in the East China Sea and for more than 100 kilometres across the mouth of Hangzhou Bay immediately to the south, waiting to dock at Shanghai or the next nearest port at Ningbo on the southern side of the bay in neighbouring Zhejiang Province.
Mr Scanlan, who has been visiting both China and India for nearly 40 years and who has led WA woolgrower tours of both countries, said a Chinese friend had sent him screenshot from a supply chain tracking website of the ships waiting to dock at Shanghai.
"It is just amazing, it is unbelievable there are that many ships waiting to get in and out (of port)," he said.
He said much of Australia's wool normally went through Shanghai port and was distributed from there to processing mills in surrounding provinces.
However Westcoast Wool & Livestock broker, auctioneer and country director Danny Ryan said some of Australia's wool heading to China could avoid the shipping holdup at Shanghai port.
"A lot of the wool destined for early processing goes to ports south of Shanghai, although some of the combing mills (third step in wool processing) are in the areas around the outskirts of Shanghai," Mr Ryan said.
"All things considered though, I think wool (price and demand) has held up really very well," he said.
Other brokers agreed.
"Although the logistics might be difficult at the moment, I think the fundamentals of wool are extremely good," said AWN WA wool manager Greg Tilbrook.
Before either the AI-ECTA signing or Shanghai lockdown last week, the WWC wool market did its own yin and yang thing - small price falls across the board on the first trading day, offset by slightly larger price rises on the second day.
On the first trading day 12.4pc of the fleece offering was passed in, but this blew out to 17.9pc on the second day as prices firmed.
Apart from the WWC's 20 micron fleece price guide, which finished the week down 5 cents to 1362c per kilogram clean and the Merino cardings guide which finished 9c down at 931c/kg, all other price guides finished up for the week.
Star of the week was the 19.5 micron guide which added 19c to 1521c/kg and the 19 micron guide added 12c to 1654c/kg.
Other rises were 1-4c.
Despite these rises, the Western Market Indicator lost 6c for the week to 1418c/kg.
In comparison, the benchmark Eastern Market Indicator lost 9c to 1375c/kg and most fleece price guides at the Melbourne and Sydney selling centres lost ground over the week.
This week the WWC is scheduled to offer 11,499 bales - a jump of 2400 compared to last week's actual offering.
The national offering increase is projected to be even larger - up 4484 bales to 49,206.
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