The Australian wool market took a severe hit this week as the downward slide continued following last week’s sharp corrections.
The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) fell by 96 cents (4.9%) for the week to close on 1,874 cents per kilo clean on Thursday 25 October. In US dollar terms, the EMI was down by 78 cents (5.6%) to finish on 1,327 US cents.
The Australian dollar against the US dollar finished 0.54 cents (0.8%) lower to close at 70.77 US cents on Thursday.
Sales were held at all three selling centres on Wednesday 24 October and Thursday 25 October. On Wednesday the EMI fell by 72 cents to 1,898 cents and in US dollar terms dropped by 58 cents to 1,347 US cents. On Thursday the EMI declined by a further 24 cents to 1,874 cents and in US dollar terms fell by an additional 20 cents to 1,327 US cents.
In local currency terms, this was the largest weekly drop in the EMI since 2003, while on Wednesday it was the largest daily fall in the EMI also since 2003.
The Western region did not experience price reductions as large as the Eastern state’s
markets this week, mainly because the Fremantle market was already trading at levels below Sydney and Melbourne.
This week’s total national offering was 33,371 bales, compared with 36,084 bales last week. The clearance rate this week was 76.5%. The New Zealand Merino Company also offered 1,151 bales in Melbourne on Thursday, with a clearance rate of 46.4%.
The low clearance rates reflected how the large price corrections were met with firm seller resistance. The national passed-in rate of 23.5% was the highest since February 2014. This was on top of the 6.9% of wool that was withdrawn prior to sale.
The EMI has now fallen by 149 cents (7.4%) in Australian currency and 105 cents (7.3%) in US dollar terms over the last two weeks.
Analysts said that there was significant downward pressure from China this week but added that
while the falls over the past fortnight have attracted considerable attention, it should be noted that there was a week-to-week rise of 126 cents in the EMI in mid-August; and that the EMI and WMI are still 296 cents (18.8%) and 399 cents (24.4%), respectively, greater than at the end of Week 17 last season when the EMI was 1,578 cents.
AWEX reported that a heavily reduced market was evident from the outset this week, and as the sale progressed buyer confidence slowly eroded, pushing prices continually down.
There were falls across all micron ranges and wool types. The declines were again greatest at the fine end of the Merinos, at the coarse end of the crossbreds (apart from 32 microns) and among the oddments.
Among the Merino fleece wools, the falls became smaller as the diameter increased, as was the case last week. By the end of the series 17.5 microns and finer were selling at levels 100 to 150 cents below those achieved last week. 19 microns and coarser did not sustain the same losses and were generally 50 to 75 cents easier.
The movements in the average AWEX Micron Price Guides (MPGs) for the Merino fleece types were as follows:
16.5 microns fell by 160 cents (5.7%); 17 microns was down by 148 cents (5.4%); 17.5 microns declined by 145 cents (5.5%); 18 microns decreased by 120 cents (4.8%); 18.5 microns fell by 81 cents (3.4%); 19 microns was down by 68 cents (2.9%); 19.5 microns lost 66 cents (2.9%); 20 microns decreased by 69 cents (3.1%); 21 microns declined by 46 cents (2.1%); 22 microns fell by 38 cents (1.7%); and 23 microns was down by 43 cents (2%).
The skirtings followed a very similar path to the fleece types. General losses of between 100 and 150 cents were experienced, with wool finer than 17.5 microns most affected.
Among the national AWEX average MPGs for the crossbred types, 28 microns declined by 83 cents (9.6%); 30 microns decreased by 44 cents (6%); and 32 microns fell by 8 cents (1.7%).
The oddment sector had another week of large losses. Locks, stains and crutchings fell by 100 to 150 cents, pushing the average AWEX Merino Cardings Price Guide down by an average of 138 cents (10.6%) on top of last week’s fall of 100 cents.
AWEX reported that the total value of the wool sold this week was AU$55.5m (AU$2,149 per bale), taking the season total to AU$1.1m (AU$2,360 per bale). Buyers for China were dominant, with support from buyers for Europe, India and Korea.
Meanwhile, concerns about supply continue to intensify. The offerings for the next three weeks are expected to be 18.8% less than in the same period last year, which would mean that the total for the season up to Week 20 would be 14.9% lower than up to the corresponding week last season.
The forecast for next week (Week 18) is 40,351 bales, followed by Week 19 at 34,296 bales and Week 20 38,680 bales.
