Few anticipated that the recent rise in wool prices could be sustained, but it was widely argued that prices could at least hold at close to the firmer levels reached following October's bull run. However, adherents to that argument have been sorely disappointed by the performance of the local wool market this week, with the Australian Wool Exchange's Eastern Market Indicator (EMI) falling by more than 4 percent, to reach 1,003 Australian cents per kilo, clean, on Nov. 8. The EMI relinquished nearly half of the gains made during October. In U.S. dollar terms, the EMI fell by a slightly lesser margin of 3.7 percent, to 1,044 U.S. cents per kilo, as the domestic currency appreciated against the greenback.
The fragility of the recent, sudden increase in auction prices was exposed as prices responded quickly and in fairly dramatic fashion to a drop in demand. Exporters reported a lack of fresh inquiry from Chinese buyers, in contrast to the brisker pace of demand witnessed in recent weeks.
Chinese buyers are believed to be in receipt of ample 2012 import quota, having purchased less than at the same time last year. A few mills are still thought to have outstanding requirements to cover before the year-end, but many may now have covered their most pressing needs.
Reprinted in part from Australian Wool Market Report