Strong open to the market … then caution

Sheep running in a yard

This week the market bounded out of the blocks to record one of the biggest one day rises in the past 10 years, however exporters found their customers pulling back prices on the final day as they took stock of the strong rally. The big story is that by the end of the week significant rises for all MPG categories were noted across the board.

The Eastern Market Indicator (EMI) rallied strongly lifting 102 cents on top of last week’s 95¢ rise to close this week at 1219¢, another 9.1% lift for the week. This puts the EMI market rally since the beginning of September (at what appears to now be the low) at 37%, with the EMI gaining 361 cents over a 7-week period. The AUD was a tad lower at US$0.71 which saw the EMI in USD terms rising 62¢ for the week, closing at 863¢. Fremantle selling last saw some of the Tuesday gains given back, with a 60-cent retracement on Wednesday to leave the Western Market Indicator gaining 52¢ for the week and now sitting at 1219¢.

An increased offering to last week of 34,661 bales came forward. With a pass-in rate of 6.4% nationally, 32,483 bales were sold, 4,798 bales more than last week.

While there were widespread price rises, skirtings were at times extreme – with the Tuesday increases maintained to the end of the week. 18.0 micron & finer skirtings posted rises of 180 cents on Tuesday and were generally unchanged to the close except for Fremantle where the easing tone of late sales impacted skirtings also.

The crossbred section was animated with all types showing improvement. Fine crossbred was keenly sought rising across the selling week, the 29 MPG lifted 158 cents or 31% for the week.

Cardings were also quoted stronger at all selling centres, with an average across the board rally of 46 cents. Melbourne was strongest with a 62 cent or 8.2% increase in the Carding indicator on top of last week’s 7.6% rise.

This week on Mecardo, Andrew Woods noted that as Mecardo articles in the past have outlined, fibre prices are bound together through blending/substitution and fashion. There is a level of correlation between prices of different apparel fibres varies as they largely follow the same general cycles and trends.

Apparel fibre markets in China have picked up during the past month, with the greasy wool market following the general apparel fibre complex. Merino prices have outperformed the other fibres, but from a relatively lower base. Such a backdrop to the recent rises in merino prices suggests the market will hold most of the recent rises and additionally hints that the market has quite likely seen the worst of the COVID-19 downturn.

The week ahead….

AWEX noted that with Fremantle selling last, the market finished on a softer note. This will pose some questions for the level of new orders placed in the market for next week.

There are 44,004 bales listed for sale with all centres selling on both Tuesday & Wednesday; this is 10,000 more than last week and will test demand.

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Data sources: AWEX, Mecardo

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