Prices struggled to hold their values this week at the Australian wool auctions, according to Australian Wool Innovation.
Most types and descriptions within the Merino wool sector fell by more than 3 per cent in AUD terms, despite the low volumes put up for sale.
Western Australia did not hold a sale this week but will return next week for the final sale of the 2022/23 season.
Following that, there will be two weeks of auctions into the new 2023/24 season before the industry heads to its annual three week recess.
The leading demand indicator of the USD Eastern Market Indicator finally succumbed to the slack demand at present and shed around 3.5 per cent after holding on resolutely to the established value the past month.
That reailience in the US prices has been largely propped up by the value of the AUD rising against that US dollar, on which the majority of wool traded is based.
There is anecdotal evidence at the latest CWIA (China Wool Industrial Association) conference of a rising interest from China in using the RMB (Chinese renminbi-Chinese Yuan) for the L/C (letter of credit) wool contract transaction, or to a lesser extent the AUD.
This is being promoted across China wool importers to lessen the risk exposure of using forex cross rates from RMB into USD into the AUD. If this comes into effect, a steadier price could eventuate, even just for the inter and intra-day auction price setting basis.
The ‘normal’ demand cycle for wool manufacturing has been hampered by the fragile global economy, led by the headline act of inflation and subsequent raising of interest rates.
The mini wool price recovery influenced by China buying from January through to March was based around the exit of China from lockdown policy, but Chinese businesses have quickly reassessed that ‘honeymoon’ period of consumer spending.
China still relies heavily on exports of all sectors of manufactured wool product and these export markets have disappointed, having already spent two years out of lockdown policy.
China top makers were the most active of buyers this week.
It was also interesting to note as the prices lowered, those manufacturers targeted the better quality wools, while trader support could only be described as subdued.
Next week AWI has 47,000 bales rostered to sell.
