June 1, 2007
June 1, 2007 - The Australian wool market dropped 9 Australian cents on Thursday after Wednesday's rise of 17 cents, and views are now split on the question of over-heating.
This week's national offering of 50,161 bales produced a 94 percent clearance. The increases in superfine wool came on the back of reports that a significant volume in stores had been released, as a response to the surging overall trend. Offerings continue to be lower than usual for this time of year and with the market so heavily influenced by shortening supply, yet combined with continuing high demand, the unique set of circumstances has sparked considerable debate about what is likely to happen next.
Several analysts are confident that prices will continue to rise over the rest of the season and at the start of next season. There are no signs of orders drying up, particularly from China, which continues to dictate auction room activity in spite of prevailing exchange rates. Reports this week indicated that there was another scramble for wool, when 95 percent of the national offering was sold, and despite today's drop in prices, sources said the mood remained upbeat, with values expected to rise again next week due to the low offering.
However, several observers believe that the current soar away prices are unsustainable. There is now little disagreement that spinners and weavers are unable to absorb values at these levels. Addressing the International Wool Textile Organization (IWTO) Congress in Edinburgh two weeks ago, President Michael Lempriere told delegates that processors would be unable to absorb current prices and that the raw-material increases would have to be passed on.
"From now on, it is difficult to imagine anything but price rises in the retail stores for products made from wool," he said. "This will mean buyer resistance and inevitably some fiber substitution."
There has been disquiet in some quarters about the remarks of Chris Wilcox, chief economist of Woolmark Market Intelligence, who believes current wool prices may be maintained for the next few months, but falling demand and a weak US dollar could cause values to slide at some stage after that. Reprinted in part from The Wool Record Weekly