Low Chinese demand brings down Australian wool prices this week

Diminishing levels of enquiry from China let to largely negative results at the Australian wool auctions this week. The Eastern Market Indicator (EMI) closed 1.6 per cent lower or 21ac to 1319ac/clean kg, while the Western Market Indicator (WMI) fell 24ac to 1378ac/clean kg. The national clearance rate dropped off to 85.8 per cent of all wool offered.

Due to the Australian dollar (AUD) depreciating against all major currencies by 1 per cent for the week, all prices expressed in foreign exchange rates went further to the favour of the off-shore buyers, making wool prices far more attractive. The USD EMI fell 26usc or 2.6 per cent to a week’s close of 972usc/clean kg, indicative of the present softer demand.

“China demand is remaining somewhat subdued as a few dominant factors impinge upon the normal supply chain operations. Restriction of power as a coal shortage and environmental targets regime are being enforced has led to most factories being electricity rationed. In many instances this means a three-day working week, obviously limiting needs for raw material inputs, factory production outputs and pay to employees who are ultimately consumers. Zero covid tolerance policy is also an inhibitor. These factors have all led to the current sluggish Chinese domestic demand for goods and more-so, the luxury goods sector that most wool garments fall into,” the Australian Wool Innovation Limited (AWI) said in its commentary for the sale week 19 of the current wool marketing season.

“On the other hand, the purchasing activity from European and the sub-continent has been the best seen for a few years. This renewed buying interest has helped the market hold on relatively well, particularly at the super fine (less than 19.0 micron) end of the type spectrum,” AWI added.

This week’s closing market quotes had most Merino fleece and skirting 30ac lower for the week, crossbreds at the finer end (25 to 27micron) were 10ac dearer, broader crossbreds 20ac cheaper and cardings unchanged. Two of the largest traders plus the major Chinese top maker dominated buying lists.

Around 45,000 bales would be on offer at next week’s auctions on Tuesday, Wednesday and Thursday.

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