Wednesday, May 22, 2024

Chinese spark wool market nerves

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Wool market volatility highlights the world being nervous about China, a major Australian buyer of New Zealand fine and mid-micron fleece says.
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The sentiment mix is made up of low world supply and China buying so much of what is there, Australian Merino Exports (AME) trader Scott Sealy said ahead of Thursday’s wool auction in Christchurch.

About 70% of the wool bought by AME here and in the bigger Australian market is on-sold to Chinese customers.

Sealy was in China three months ago when everyone was saying all wool types are a struggle and was back there a month ago as the market was crashing. 

Sales of finished clothing products are a problem in Europe because the wool price got too high and the Chinese economy was faltering.

The inventories aren’t greasy wool but are all fabric garments. Consumers stopped buying and that all flowed back through the supply chain. 

“The Chinese love to chase a rising market but when the music stops they run away and there’s no-one left to buy.”

Then for some reason, not obvious to anyone except that prices might have dropped to a level the manufacturers thought they could keep their machinery turning on, prices suddenly spiked. 

Sealy was in Christchurch for the September 13 auction that experienced one of the biggest price spurts on record for fine and mid-micron wools.

For all that, going into last Thursday’s sale, prices for the top wool were still about 30% off their highs.

Sealy has just started coming to the Christchurch auction, backing up Devold Wool Direct general manager Craig Smith, who usually  does the bidding for AME. 

The spring sales here have a strong Merino and mid-micron offering, making it a global-interest venue for several weeks.

That it also because of the impact on the much bigger Melbourne sales of the severe and long-running drought in major Australian sheep farming states having a massive impact on wool yields and quality. Victoria is good but New South Wales, the biggest wool state, is in a terrible position. 

The range of wool on hand in Christchurch, including the mid-micron, provides Sealy with opportunities for new business for AME though he would not mention specifics. 

His presence allowed Smith to focus on his other work at a busy time and the trip from Melbourne is an easy one, he said. 

AME also buys NZ Merino wool at the Melbourne auctions but doesn’t buy any NZ strong wools destined for carpet makers. 

One of the top five Australian exporters, its high value market is Italy for the best fine wools, the 18.5 microns and finer wools for best top-making.

NZ’s tighter fly-strike deterrent rules helps our wool sell well in Europe. AME processes wool in Italy and excellent processing yields achieved by NZ Merino also helps the premium.

Those factors wouldn’t be going away so the wool will remain attractive to that market.

China buys a lot of wool in the 19 to 27.5 microns range, with its main focus around the 25.8 level.

NZ does well in the 21.5-23 micron levels, for which Australian production levels are low, Sealy said.

NZ wool also more often has longer fibres, also popular in the market.

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