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Wool price drops, but positive signals remain

The Rintoul family are approximately halfway through selling their annual clip and offered a section of the September shorn clip from Dongiemon ewes and wethers at last week’s sale.

THE double edged sword has taken a swipe at the climbing wool market this week, with the Western Market Indicator (WMI) only dropping slightly from last week’s record high to close at 1118 cents per kilogram.

But now it seems buyers are beginning to hesitate at the high prices.

It comes amidst reports that China, the current driving force of the Australian wool market, had eased off on purchasing wool from Australian suppliers, claiming it was too expensive.

Other buyers also seemed price sensitive and when coupled with a larger quantity of wool in the market, it led to a price correction at the close of trading on Thursday which had been anticipated after the previous week’s massive jump.

However industry professionals maintain China remains an active force in the buying room but was operating at lower price levels, which was a key factor to the price correction.

The Wednesday sale opened strongly with substantial price increases to close at 1183 cents per kilogram, up 58 cents, but some weaknesses in the later stages of trading gave an indication of the sharp 65 cent fall to 1118c/kg experienced on Thursday.

Last week’s record prices had also triggered an increase in volumes of wool on offer across the country, with the national offering the second largest for the season.

Ongoing concerns about the dwindling supplies of fine wool meant the 18 and 18.5 micron bales continued to rise by 35 and 10 cents respectively in WA, while the medium wools corrected from last week’s bumper sale and dropped anywhere from 16 to 36 cents.

Over in the east, the Eastern Market Indicator (EMI) continued upward and closed at 1191c/kg, a weekly increase of 39 cents and a 23-year high.

Elders WA wool export manager Stewart Raine said the price correction in WA was in direct relation to China lowering its price ceiling as it looked for a cheaper market.

“The Chinese continued to freely buy wool this week, however it was at the lower price levels,” Mr Raine said.

“The price correction was a reaction to the Chinese processors, so it looks like China is poised to re-enter the market at the lower levels.

“We’re waiting on the reaction from those further down the chain, because the true test will be if they can pass these price increases on to the consumer.

“I think the price increases in the last two weeks have taken China by surprise, but it’s still very positive.”

According to Mr Raine, in a broad sense China remained the main buyer, with Europe also supporting the market.

Interestingly, there was increased activity from India which looked set to re-enter the market at these levels, as it may be looking to secure some quantities in the near future.

Westcoast Wools director Brad Faithfull said the past two weeks had been an exciting time for the wool industry, and maintained it was business as usual for their biggest customer, China, as it was still looking to acquire Australian wool.

“Obviously it has been quite an exciting time for the industry with aggressive purchases driving prices up,” Mr Faithfull said.

“The market can handle good lifts in price from week to week, but that rise was a bit too aggressive and the market needs to adjust.

“But it’s business as normal for us, and we can still sell certain wool types at these price levels.”

Mr Faithfull said the medium to broader wools may taper off a little bit, but the fine wools would continue to perform.

Primaries wool manager Tim Chapman agreed, saying China was still active and the overall market had been maintained at positive levels, with prices easing off only slightly.

“China is not pulling out, they are still quite active with main buyers such as Viterra, Queensland Cotton and PJ Morris all still buying for Chinese markets, they’ve just come off the boil a bit,” Mr Chapman said.

“There were larger quantities in the sale this week, so the bigger sale has slowed things down again.

“But speaking with the agents on the floor, they are still quite confident the wool market will continue to perform well.”

Mr Chapman said that over the two days the prices had virtually levelled out from the price jump at the first sale of the year, with the unfortunate drop on Thursday causing this.

Looking forward, Mr Raine said it would be very interesting to see what the third week of trading holds this week.

“This week at 12 noon all eyes will be on the buying room just to see who is in there,” he said.

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