Wool prices reach six-month high as Australian dollar falls

Australian wool prices have reached a six month high, raising hopes the worst is over for the market rattled by COVID-19 as the lower Aussie dollar and strengthening demand play into the industry’s hands. The Eastern Market Indicator lifted 16¢/kg to close at 1407¢/kg last week — the highest level in Australia dollar terms since July 2021, when the EMI reached 1423¢/kg. The benchmark indicator hasn’t tipped the 1500¢/kg mark since March 2020. Last week’s figure was also 49¢/kg higher than pre-Christmas prices with European interest sparking gains before China returned to the fore later in the selling week. Swan Wool Processors managing director Paul Foley said the rally was genuine and not speculative, with orders required for immediate shipment. “Although there are still some COVID hurdles in the market, the lower Australian dollar has had a positive effect and has helped generate fresh business,” he said. There was a large offering of 44,098 bales nationally, compared to 46,256 bales the previous week. Australian Wool Industries Secretariat executive director Peter Morgan said movements in the market were influenced by the fall in the US exchange rate, which finished 1.56¢ lower to close at 70.82¢ last Thursday. “By the strength in the market, which was apparent on Thursday, the fall in the US Exchange rate was attributed to the fall in global economic confidence and rising inflation during the week,” he said. Australian Wool Innovation wool trade consultant Scott Carmody said in US dollar terms, the Eastern Market Indicator went in the reverse direction as the Australian dollar forex rate depreciated substantially, by 2.2 per cent against the US dollar. “As such, the US dollar EMI closed 12 US¢ or 1.1 per cent lower at 996 US¢/kg,” he said. “The Western Market Indicator gained a strong 19¢/kg for the week and finished at 1455¢/kg, as all Merino fleece and skirting types offered were generally 20 to 40¢ dearer.” Mr Carmody said it was mainly European and sub-continent interest that sparked the initial gains in 2022. “But the latter parts of last week saw China return to the fore,” he said. “Widespread buying interest from China caused additional values to be placed on all wool.” Mr Carmody said the Australia Day public holiday last Wednesday had a positive impact on the market. “Thursday sold in complete juxtaposition to Tuesday as all Merino wools shot up by 30¢ dearer, while cardings sold 10¢ dearer and crossbred wool types up 5 to 10¢,” he said. “Shipping issues remain under the keen focus of exporters as scheduled sailings of vessels are an increasingly wild-card factor in executing contracts. “Delays at ports and dumps are leading to a longer lead time required to meet those delivery and letter credit requirements.” National Council of Wool Selling Brokers of Australia executive director Paul Deane said as the global recalibration in US interest rates dragged the Australian dollar lower, this in turn would support higher wool prices. This week sees another change to the normal sale day schedule, with sales to be held on Wednesday and Thursday due to a recent decision to not hold sales on Chinese New Year Day (Tuesday, February 1). The national offering is of a similar quantity to this week, with 41,790 bales currently expected to be offered in Sydney, Melbourne and Fremantle.