Australian wool exports further hit by global shipping delays

Congestion of 250 40-foot shipping containers at South Africa's Port Elizabeth bound for China, valued at about R500 million (A$46m), caused Cape Wool auctions to temporarily cease last week, pulling 10,000 bales from the global market.

The supply chain disruption and shortages caused initially by the COVID pandemic are set to continue well into 2022, which Elders Victorian wool manager Lachie Brown said had buyers struggling to trade the volumes they would have been able to pre-pandemic.

"It is stretching the ability of the trade to finance ongoing purchasing," Mr Brown said.

"We are seeing some wool purchased recently unable to be shipped for up to eight weeks, which is creating headaches for exporters and processors in terms of cash flow, and supplying machinery.

"There are a number of buyers and exporters who are restricted in their buying at the moment because they are unable to get previously-purchased wool onto ships, and therefore be paid."

It is anticipated to take about a month for the backlog of wool to ease at Port Elizabeth, with shipping services from South Africa to China falling from three to one.

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However, Mr Brown said having 10,000 bales less available for the global wool market last week was a positive factor for the well-supplied Australian market, which had close to 50,000 bales catalogued weekly for the past month.

"Delays in shipping from Australia are severe as well - we are all having the same issues in terms of getting wool onto water," he said.

"Many exporters are saying shipments are getting cancelled or loads are getting bumped to later vessels."

Anything going in, or out of, China by plane, train or ship was subject to extra quarantine measurements and paperwork, leading to time delays, staffing issues and extra costs, he said.

Despite this, he said the market had maintained much of the new year price gains with the Eastern Market Indicator finishing at 1421 cents a kilogram last week.

"Offerings will start to back off after Easter, which will hopefully release some of the pressure on those finance and cash flow issues, however it is likely to remain a headwind for the market for at least another six months," he said.

"The resilient prices point to a fundamental strength in the demand - wool is being purchased and consumed - it is just a struggle to get it to the processors in a reasonable timeframe."

Commentators are watching the Russian invasion of Ukraine, with the tension between the two nations affecting everyday Europeans.

"Wool is so sensitive to economic and geopolitical shocks as a discretionary product," he said.

"Buying and processing wool is still a key behaviour for those involved in the early stages of the processing industry across Europe, but increasingly wholesalers and retailers will be assessing the consumer sentiment and the potential fall out as this conflict continues.

"Forward prices have dropped considerably in the past week in Australia while the trade and processors await more certainty, so it is worth growers taking some risk off the table and assess selling physical wool in the near term."

Terrick West Poll Merino stud principal Ross McGauchie, Prairie, who participated in the recent Loddon Valley Merino Field Day, said growers were feeling positive despite market uncertainty.

"It has always been and always will be subject to the vagaries of politics, decisions of governments and trade embargoes but generally speaking, there is still very good demand for Australian wool," Mr McGauchie said.

The McGauchie family sold 160 bales of 18.5-micron wool in December to 1600c/kg, averaging $500 a bale more than their previous sale.

He said their marketing strategy had always been to "sell when the wool is ready".

"Selling when your wool is ready has averaged out over the years to be a good policy," he said.

"There are plenty who play the futures market and people who hold for better times but the reality is no one knows what the wool market will do."