Sustained wool demand brings sellers back as prices ‘surge’ for Merino fleece types

The wool market has climbed higher for the third consecutive week on the back of sustained Chinese demand, with the Western Wool Centre closing up 22 cents during Week 21 to reach 1316c/kg.

The Australian Wool Exchange Eastern Market Indicator closed the week ending November 23, up 19 cents to 1170c/kg, with the largest gains made in the finer Merino wool types.

An Australian Wool Innovation spokesman said the increased buying pressure from China had initially activated the market into higher territory, but other global wool destinations had also entered into “placing small orders as well”.

“Italy and India have bumped up their auction activity slightly, which has subsequently caused their buy in levels to be lifted to the spot price, or above, to secure some pre-Christmas supply risk mitigation as well as price surety,” the spokesman said.

“The third largest of the Chinese top makers continues to overshadow the current buying of the usually dominant top two makers.

“This has been the case for quite a few weeks now, as that company is somewhat of a uniform supply specialist to the local Chinese industries and state owned enterprise.

“A large percentage of recent government uniform orders has reportedly flowed to that factory.”

AWEX senior market analyst Lionel Plunkett said the previous week’s rises “encouraged more sellers to the market”, pushing the national offering up to 43,688 bales.

So far in the 2023-24 selling season 752,230 bales have been offered, up 7.6 per cent year on year, with the passed in rate at 8.4 per cent, down 5.1 per cent.

Season to date the value of the market is $914 million, down just $4m on last season after a weekly turnover of $53.81m during Week 21.

While the Australian dollar strengthened against the US dollar during the week it didn’t have any impact on the demand for the Merino fleece types which “surged anywhere between 20ac and 60ac clean/kg”.

“This continues the escalation of Merino prices with all micron categories five per cent to 6.5 per cent cumulatively dearer over just the past two weeks,” the AWI spokesman said.

Episode3 market analyst Mike Avery said with three weeks to run until the Christmas recess in trading, “time will tell if the rally can be sustained”.

“In general, the market finds it hard to hold a rally passed the five solid sessions we have experienced over the last three weeks,” Mr Avery said.

“The pending recess may play a part in sustaining the rally but only if demand can be maintain.

“If so, we may see new year hedging levels that growers could find acceptable to offset some risk.”

About 49,134 bales were rostered for the Week 22 sales, November 27-29, which would be the last designated Superfine sales held until the second half of the season in February 2024.

Mr Plunkett said if this quantity was reached it would be the largest sale since April 2023.