Australian wool auctions saw further price decay this week, but a slightly better atmosphere was in play. This gave participants a sense of cautious optimism that our overseas buyers may soon be willing to step back into the market. Invariably if positivity does return, this generally leads to many participants moving at the same time causing spikes rather than measured moves. Either way, any improvement to price levels or added stability to the market will go a long way to assist all sectors of the wool supply.

The same impediments to wool prices remain a stagnant factor within the wool trading environment. Global inflation and the associated rising interest rates are the headline act. Energy costs are the main casualty of those inflationary pressures and that is exacerbated by the continuation of the Russian Ukraine conflict, and now, even access to that energy supply is being removed. A steeply appreciating cost of finance in addition to that accelerated manufacturing outlay has been the immediate result.

The zero covid policy of our largest consuming market; China, is causing a major loss of consumer confidence.  The rolling lockdowns are preventing “normal” garment sales occurring, with little incentive for the Chinese shopper to buy new product given that outdoor activity is non practical and ill-advised under the current regime policy. 

This situation has obviously flowed through to the manufacturing businesses in China who are reticent to even create products that are now unlikely to be able to sell easily into the domestic market. Additionally competition is getting fiercer for the low volume premium-priced European, Japanese and North American business, so stocks of any significance of product at any stage of the wool pipeline is frowned upon.

For the first time in many weeks the forex rates went against the local price by the Australian dollar strengthening by 1%  against the US dollar. The USD remains the dominant global currency of choice and remains highly valued. One USD is still worth over seven RMB which places even more pressure in wool purchasing decisions for the Chinese factories.

Around 35,000 bales are to be offered next week and we are back to the normal Tuesday and Wednesday selling.