Prices struggled to hold their values this week at the Australian wool auctions. Most types and descriptions within the Merino wool sector fell by more than 3% in AUD terms despite the low volumes put up for sale. Western Australia did not hold a sale this week but will return next week for the final sale of the 2022/23 season. Following that, there will be two weeks of auctions into the new 2023/24 season prior to the industry heading to the annual three week recess. 

The leading demand indicator of the USD EMI finally succumbed to the slack demand at present and shed around 3.5%  after holding on resolutely to the established value the past month . That resilience in the US prices has been largely propped up by the value of the AUD rising against that US dollar, which a majority of wool is traded upon. 

There is anecdotal evidence at the latest CWIA (China Wool Industrial Association) conference is of a rising interest from China in using the RMB (Chinese renminbi-Chinese Yuan) for the L/C (letter of credit) wool contract transaction or to a lesser extent the AUD. This is being promoted across China wool importers to lessen the risk exposure of using forex cross rates from  RMB into USD into the AUD.  If this comes into effect, a steadier price could eventuate, even just for the inter and intra day auction price setting basis.  

The “normal” demand cycle for wool manufacturing has been hampered by the fragile global economy, led by the headline act of inflation and subsequent raising of interest rates. The mini wool price recovery influenced by China buying from January through to March was based around the exit of China from lockdown policy, but China businesses have quickly re-assessed that “honeymoon” period of consumer spending. China still relies heavily on exports of all sectors of manufactured wool product and these export markets have disappointed having already spent 2 years out of lockdown policy.

China top makers were the most active of buyers this week. Interesting to note that as the prices lowered, those manufacturers targeted the better quality wools. Trader support could only be described as subdued. 

47,000  bales is rostered to sell next week.