Auction prices in Australia (AU) started the year on a very strong note, with Australian Wool Exchange's Eastern Market Indicator increasing by 3.6 percent to reach 1,111 Australian cents per kilo clean, its highest level since May 2012. In U.S. dollar terms, the indicator rose by 3.5 percent to 1,171 cents per kilo clean.
Price increases were fairly uniform across the offering, though in general it was coarser wool values that recorded the largest increases. Prices for 16.5 to 17 micron fleece generally rose by 2 percent to 3 percent, whereas those for mid-micron wools and crossbreds firmed by 3 percent to 5 percent.
Demand picked up where it left off at the end of last year, with keen buying interest discernible, mainly from China, but also from Europe, in the finer wool categories. It is noteworthy that reports emerging from China as of late have pointed to an upturn in demand for fabric, stimulated by a particularly cold winter and increased sales of warm clothing.
Australian traders confirmed that sales to Chinese buyers had been fairly slack over the year-end period, owing partly to a lack of fresh enquiry from that country, but also to the modest volumes offered by traders from stock positions. However, buying interest again picked up as auctions restarted, with processors eager to secure quality requirements. Although weekly offerings remain sizeable, as wool previously withheld from the market comes to auction, there is a growing perception among Chinese buyers that the supply of preferred mid-micron styles may be tightening. The quality composition of this week's offering was lower than before the break.
Demand from China again focused on the 19- to 22-micron range. Trade offers of 21 micron were generally pitched just below US$13 per kilo, greasy, CIF (90 days Letter of Credit).
Price movements at next week's sales will repay close scrutiny. In trade circles, there is a growing confidence that demand should be sufficient to support prices at close to current levels for the foreseeable future. However, there could be a seasonal element to the recent strength of demand from China and January auctions in recent years have frequently seen strong rises in prices, which have subsequently been relinquished.
Reprinted in part from WTiN Wool Market Report