Market Morsel: China focused on fine Merino

Fibre | 31st January 2022 | By Andrew Woods

Market Morsel

Focussed on fine merino wool, new Chinese business on Wednesday fuelled the higher prices seen at auction on Thursday. It seems there is enough domestic Chinese demand in combination with minimal stock levels to bring Chinese processors into the market.

A stronger US dollar helped the Australian auction market with merino prices returning to be close to mid-2021 peak levels. In US dollar terms however merino prices, albeit trading solidly, are nowhere near their 2021 peak levels. The weaker Australian dollar is making the wool market look stronger in local currency terms than it is. The stronger US dollar also effects European demand which buys wool tops out of China in euros, so with a strong US dollar the price of wool rises for the Europeans.

In five year percentile terms merino wool is trading (on average) close to the 70th percentile, below cotton and acrylic, and above polyester staple and viscose. In apparel fibre terms merino is in the middle of the pack, with crossbreds bringing up the rear by a long way.

17 Micron

The price premium for 17 versus 21 micron remains high, and has been so for seven months now. The longest such a premium has remained at high levels is around a year from late 1987 through late 1988. Renewed Chinese business this week helped minimise discounts for fault in the finer micron categories.

19 Micron

The eastern merino clip was marginally finer in January while the western clip was broader once again, so on balance the merino clip was slightly broader in January which reversed a trend seen in late 2021. This has some implications for fine and broad merino wool but we need a few more months of data to see what is going on.

21 Micron

The 21 MPG finished the week 10 cents higher. In Australian dollar terms the 21 MPG looks strong while in US dollar terms it continues to appear “comfortable” with no great trend up or down in price.

28 Micron

There were some crossbred RWS lots offered this week which seemed to garner premiums in the range of 100 cents clean per kg. In general though prices for crossbred wool are highly variable reflecting a lack of willingness on the buy side to purchase unless for a specific order.

Provided by Elders Wool. Prepared by Andrew Woods (Independent Commodity Services) with contributions from the Elders wool team.
Photograph courtesy of @krisifrost

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