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Australian Wool Market Commentary from AWI (29 May)

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Large price gains were the basics of the Australian wool auction markets this week. The positive mood of the

past few months extended once more and gained momentum, as all types and descriptions on offer appreciated greatly. The small offering of just over 37,000 bales was obviously not enough to quench the current demand for Australian wool, particularly for Merino fleece wools. As a result some types in the Merino sector put on extraordinary weekly gain of up to 140ac/ clean kg in one instance, with a general 60 to 100ac/ clean kg rise being evident by the close of selling.


With such positive activity and strength of competition, the EMI (Eastern Market Indicator) concluded the week at a 4 year high at 1312ac/clean kg or 70ac/clean kg higher. This level has not been seen since the July/August period of 2011 and now sits at a level equating to 26% higher than at the same time last year.


The overall confidence in wool demand reported back to Australia from last weeks IWTO (International Wool

Textile Organization) conference in China was found to be spot on, as the major Chinese buyers exerted their strength in buying in local sale rooms. The competition was intense, as the local forward sellers and exporters put up a stronger fight this week to put some wool into their inventory and cover some obviously badly positioned forward contracts. The weak AUD helped the Chinese indent buyers immensely and they

fully utilised the 2.5 to 3% week on week advantage in currency.


The short to medium expectation of a relative shortage in global wool supply has triggered much of the

activity, as stocks in most sections of the supply chain have been allowed to run dangerously low.

All Merino fleece types were in great demand and gains of 60 to 80ac/clean kg were made in the fine and

superfine area, with the lower quality wools appreciating the most, as buyers looked to buy in as cheap as possible as the market raced away. Fine, medium and broad (19.5 to 23 micron) Merino fleece came under the strongest of attention and rises of 90 to a staggering 140ac/clean kg were made, with the largest gains made in the broadest sector, as quantities of these wools are low. Once again the majority of wools were

purchased by Chinese interests.


Merino skirtings, all cardings and all Crossbred types gained a similar 20 to 35ac/clean kg for the week, apart from a very small offering of 24 to 27 micron crossbred fleece which gained 80ac/clean kg. Demand remains strong, and renewed activity from the large top makers indicates that wool top sales are being made downstream Next week the extremely low volume of just short of 26,000 bales will surely test the depth of the buyers pockets.


Most participants assume that the market will remain at strength until global mill stocks are replenished. With RSA and South America winding down for their seasons in the upcoming month, that will place further pressure on the Australian supply.


Source; AWI


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