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Prices at the finer end easing and broader categories firmer was a characteristic of both the Sydney and Melbourne markets this week, as has been the case (for the most part) this season. With all micron categories declining recently, it becomes easy to lose sight of the underling trends driving the market and become fixated on the immediate outcomes. However, with an unchanged EMI this week, it provides an opportunity to pause to assess what direction the wind is blowing.

As detailed by Mecardo previously, the shift in supply towards a finer average micron in early 2024 has been contributing to the steeper price declines in finer micron categories. This financial year, 17MPG in Melbourne has lost 140 ȼ/kg; 21MPG in Melbourne is 12ȼ higher in the same period. In Figure 1 we can see the 17 MPG in Melbourne approaching the 21MPG and the basis between the both has come in considerably in the last 12 months as a result, (a decline 475ȼ or 52% lower).

 

This week In Sydney, 17MPG lost 5ȼ to 1757ȼ/kg and In Melbourne, 17MPG lost 9ȼ to 1755ȼ/kg. 20MPG in Sydney improved 6ȼ to 1348ȼ/kg and 21MPG in Melbourne gained 2ȼ to 1321ȼ/kg.  

 

Demand for wool has been a bear that refuses to be poked. Signs of economic recovery that the wool trade has been searching for, are yet to appear. In an easing market, bidders will still be eager to secure stock, but a momentum shift is needed to push prices up.  This week’s demand was steady with a consolidation of volumes sold (just a 1.7% decline Week on week) and an unchanged pass-in rate (steady at 9.5% nationally).

 

Whilst total wool supply doesn’t necessarily impact the relative performance of individual micron categories, auction offerings have been ahead of schedule this season, contributing to an easing market.  This could be about to change, a month ago total season offerings were 6.7% higher year on year, this week the number is just 1.6% higher than last year.  Further to this, offerings and volumes sold are typically higher at this time of year (see Figure 2).  

Next week

With the foot off the gas momentarily for auction volumes, it will be interesting to see if this has an impact on the rate of the fine wool premium declines. It is likely that premiums will still receive some downward pressure as we move forward, but the peak periods of this pressure are likely to dissipate after Quarter 2.

Sydney’s designated superfine sale will be watched keenly to identify whether fine wool premiums continue to decline steeply or are approaching a steadier state.

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Data sources: AWEX, AWI, Mecardo

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