Australian wool prices break new 29-year highs

27.03.2017

Australian wheat prices are breaking 29-year highs, as demand for premium wool booms.

The Australian Eastern Market Indicator finished this week at AUS$1,546 per kilogramme, up some 19% year-on-year, at a 29-year high.

"Active purchasing by the two largest traders in the Australian market is underlying this trend," Rabobank said, with strong Chinese demand underpinning prices.

Buyers seek high quality wool

Demand is focused on better quality wool, as Chinese mills respond to a "booming knitwear market," with action volumes up 5% year on year, Rabobank noted.

"The superfine merino sector led the price escalation but gains were also made at the finer end of the crossbred segment," Rabobank said.

"Any wool slightly below ideal specifications has seen discounts heavier than usual, indicating a high valuation for quality fibre in the textile industry presently," the bank said.

"The uninterrupted rise seen since the beginning of the year came on the back of surging demand from Chinese buyers who have depleted their stocks, coupled with a decreasing supply of wool from Oceania due to less favorable weather conditions over the past months," said Focus Economics.

Wool markets shrug off cheap cotton and acrylic

Late last month, the industry body Australian Wool Innovation said that wool markets are effectively uncoupled from other fibre markets, allowing the premium of wool to cotton or acrylic to widen.

"Wool accounts for less than 1.5% of global fibre consumption, so it becomes evident that wool is not a bulk commodity such as acrylic, nylon, polyester and cotton," AWI said.

"As the value of these other commodities remains low or in decline due to oversupply or low soft crude oil prices, the value of wool need not follow suit.

"The position of wool as a premium fibre, when compared to these other fibres, should allow the price to be set by consumer demand and not impacted by the low price of synthetic and bulk production competitive fibres."


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