Consumers in US and Europe need to stimulate demand for wool product

Keeping the flame going for wool is the next challenge

Wool market activity is being held steady by processors, but too much supply in the next few weeks could have negative consequences.

Wool market activity is being held steady by processors, but too much supply in the next few weeks could have negative consequences.


Consumers in Europe and the US are key to stimulating wool market activity this month.


A familiar pattern continued at Australia's national wool auctions last week, with a large initial offering being followed by a decrease in price, leading to big withdrawals and more wool being passed in, before a scramble for quantities kicked prices up on the final selling day.

Initially, the build-up in quantity after the one-week Easter recess meant there were about 54,000 bales scheduled to be offered.

This was pruned back to an even 50,000 bales before the first auction day "bounce-down", as it did not seem that buyers had suddenly found a heap of demand.

After a "doughy" start, the pass in levels rose - by up to 20 per cent at Fremantle.

On the second selling day, on Wednesday, the currency increased quite sharply - just to add another factor into the mix.

Again, buyers remained circumspect and tentative for everything except the superfine Merino types.

By the time Melbourne brokers dusted-off the gavel early on Thursday, some overseas buyers were asking if they would get their orders filled for the week - and some were inquiring about the cheaper prices being bandied about.

So, the mood for most types was decidedly more positive.

After the last lot had been dispatched, the overall market had closed down by nine cents a kilogram.

Currency changes meant that US Dollar prices were 7c/kg higher, but Euro prices were 12c/kg lower - such are the vagaries of current international currency markets.

Across the whole week, the most attention was focused on wools measuring finer than 18.5-micron - as China appears to have concrete demand for this sector from its domestic market.

Medium Merino wools, particularly the lower yielding faulty types that are coming through as leftovers from the drought - or fresh new wools - struggled to find favour.

But when demand does increase, buyers will renew their focus and step on the pedal - as the majority of the wools beneath the dust and burr are very good in processing terms.

But demand is the missing factor for this segment, with whispers of uniform orders not generating demand and a fair quantity of stock purchased during the previous six months still making its way slowly through the system.

Skirtings and carding types closed the week in positive territory, provided the specifications were good.

In some cases, these wools delivered very good returns, as indent buyers followed instructions to the letter - when they could have actually purchased fleece for the same amount of money.

Such is the case when a lot of the products in China are being processed on the woollen or semi worsted system and, so, require shorter wool inputs.

The indent operators, or the less adventurous processors, are requesting the traditional ingredients for their "recipe" without realising that fleece wool is selling for a similar price and will provide a much higher processing yield - even if it is cut later to achieve the shorter length before making the yarn.

Crossbred woolgrowers can be heard gnashing their teeth when their wool broker calls them as they load the final truck of prime lambs and cast for age ewes at record prices.

Unfortunately, it is a simple case of producing the same product as everyone else in the world - a 26 to 32-micron wool - for which there is no current fashion-led demand.

The fake fur juggernaut has moved on, or become a finer and softer product, and not enough designers or creators have been able to find a "new" product to excite this market.

Similar to medium Merino wools, the "old" stable of products are just not cutting it these days - especially in the post-pandemic world - and particularly when South America, Europe, Russia and even China also produce a fair amount of the same wool.

Merino wool undoubtedly has less competition globally and has settled into a new, totally different, niche in which it currently looks very comfortable.

Chinese consumers, like those across the rest of the world, are banned from travelling the globe and are not spending money in overseas locations.

Similar to many Australians, they have more disposable cash and airlines and hotels around the world are missing out.

But local companies that can offer a similar garment to what was previously purchased in New York, or on a High Street in London or Europe, are doing very well.

Through sheer weight of numbers, the Chinese consumer is supporting a large chunk of Australian and South African Merino wool production as they purchase the new range of next-to-skin, active and leisure wear - and some very fancy knitwear garments in a wool and cashmere blend composition.

As mentioned, a lot of these garments have previously been purchased in overseas locations by travelling Chinese consumers. These are now being purchased in-situ, or online.

But the concern in the industry is still about the European and American consumer market, which surely cannot be replaced entirely by the cashed-up Middle Kingdom.

Data from the US shows what $1-2 trillion can do to create economic activity, with so many measures in the States now getting back to pre-pandemic levels.

Add in the seemingly successful COVID-19 vaccination program being rolled-out in the US and, just maybe, the American consumer will be back in the ring by the time new Merino wool products hit the shelves in September.

It seems a long way ahead, but those in the processing chain are used to operating on this sort of timeline and plenty would be watching the horizon and getting ready to ramp-up activity accordingly.

The news from Europe is less buoyant.

But a lot of European production makes its way across the Atlantic. So, the first stage in a European recovery is no doubt an American recovery.

Some European processors, without having seen a dramatic bounce, have accumulated enough orders on their books to need to start juggling production schedules.

Moving back down the processing chain, and the next month is critical for market activity in Australia.

If progress continues, demand will increase and prices will increase.

But too much supply will snuff-out the flame.

The story Consumers in US and Europe need to stimulate demand for wool product first appeared on The Land.


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