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Wool market back in the black as Eastern Market Indicator lifts by record $1.70 a kilogram

Cara Jeffery, Thursday September 12, 2019 - 18:24 EST
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Positivity has returned to wool auctions as the Eastern Market Indicator lifts in a record week. - ABC

The embattled Australian wool market is back in the black after the Eastern Market Indicator (EMI) gained a record $1.70 a kilogram this week.

The $1.70/kg lift is the highest weekly increase in the EMI on record, and takes the EMI back up to $15.35/kg.

Australian Wool Exchange senior market analyst Lionel Plunkett said .

"From the opening hammer it was immediately apparent buyer confidence had returned," Mr Plunkett said.

"With the confidence came strong, spirited bidding from all major players, resulting in large price increases.

"Exporters fought hard to secure market share."

There were 21,839 bales offered with only 6.2 per cent passed in.

Much needed price hike

It was a significant turnaround for the market considering that just a fortnight ago more than 30 per cent of bales were passed in at auction .

That was more than $7/kg cheaper than the same time last year.

Major price gains were made across Merino fleeces with the 19 to 21-micron categories rising by $1.60 to $3/kg.

Crossbreds and Merino cardings also finished on a high 70 cents to $1.86/kg firmer.

Trade tensions between the United States and China had been plaguing the Australian wool market for several weeks.

However, Endeavour Wool Exports trading manager Josh Lamb said the sentiment from China changed over the weekend.

"There is a more a neutral or slightly positive tone coming from China now as opposed to the pessimistic tone we have seen in the last six to eight weeks," Mr Lamb said.

"This, coupled with the low supply situation we have because of the drought, has added a bit of heat to the market."

Australia exports 80 per cent of its wool clip to China.

And due to the ongoing drought, wool production in Australia is forecast to fall by around 15 million kilograms in 2018-19 to 285 million kilograms.

Exporters anticipated dearer trend

Mr Lamb was not surprised that the market lifted this week.

"We were expecting a better market this week, but it was probably just that little bit stronger than expected," he said.

"There are nervous exporters who are trying to cover orders or buy a little bit of stock. And with a lower supply than normal at this time of year, due to the drought, there was more competition in the market.

"But it is certainly a very nice lift after six pretty awful weeks for the industry."

A sign of the reduced supply saw just one auction at Sydney this week, while Melbourne and Fremantle maintained two days of sales.

Mr Lamb, who was buying at the Melbourne wool sales, said while there was a positive mood in the auction room.

However there was a long way to go to reach record levels.

"It has turned around a little bit, but I think that even after this lift we are only back to levels of three weeks ago. We still have a long way to go," he said.

"That could improve further if trade talks between China and the US improve in early October.

"It is hard to say if the lift in the market is back for good, but it's certainly a step in the right direction."

Mr Plunkett said, as expected, the large price increase had enticed wool growers back into the market.

Next week's offering has increased to 31,107 bales, with auctions to be held at all three centres — Melbourne, Sydney and Fremantle.


© ABC 2019

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