Ultrafines hold up in struggling market

Despite positive signs at the finer end of the Australian wool market, the medium-to-broad range struggled at last week's sales, according to AWEX.

AWEX reported the Eastern Market Indicator (EMI) fell by 7 cents to finish at 934c/kg clean.

"The first of four Newcastle sales for the season, where stylish ultrafine types were offered and well supported, provided some relief after ongoing weakness in this sector," AWEX said. "A late rally at the Newcastle sale will give some confidence leading into September."

Australian Wool Industries Secretariat's Peter Morgan said the Newcastle sale lifted the Northern Indicator by 2c/kg and 16.5 and 17 micron average Micron Price Guides (MPG) and crossbred types were up at the end of the week.

"The highest price reported in Newcastle was 2300c/kg for a 14.1 micron lot," Dr Morgan said.

However, he said the northern and southern regional indicators finished 0.9 per cent lower, when the US exchange rate fell by 1.7 per cent.

He said the Western Market Indicator (WMI) was down by 4.3 per cent since the last sale in Fremantle two weeks ago, when the WMI outperformed the EMI.

The WMI fell by 43c to finish at 932c/kg.

"This difference was partly due to the shift in the market over the last two weeks but also seems to include a correction from two weeks ago," Dr Morgan said.

Elders national wool manager Andrew Dennis said the market highlighted the uncertainty facing the trade.

"On one hand, the concern is over China and the prospects of it operating at half of capacity in response to stagnant demand from spinners," Mr Dennis said.

"China should continue to operate at this level in order to retain staff and avoid costly shutdown."

He said some traders' wooltop stock was building and there had been some offers well below market.

"Another problem facing Chinese mills with high levels of stock is the requirement to pay down their credit facilities at year end," Mr Dennis said.

"Even with the potential of the Chinese Government to reduce this pressure, banks seem to be reluctant to advance further credit to textile operators."

Mr Dennis said Spin Expo took place in Shanghai this week, together with Idea Biella and Premier Vision in Europe, all of which would allow spinners and weavers to showcase their intentions for the next season.

"This should generate some enthusiasm and kick-start the stalled ordering cycle," he said.

Mr Dennis said Australian Wool Innovation's market intelligence reported that the over-50s demographic in the UK, German, French and Italian consumer market was forecast to grow by 10 per cent.

"This group's income will also grow by 10 per cent which will magnify the importance of this market."

Mr Dennis said stability appeared to be gaining traction in Europe which could mean positive news and a turnaround for the wool market.