Fine wool at “bottom of the cycle” as growers await global recovery
Fine wool prices are crashing as consumers struggle to find cash to spend on fancy clothes.
Hope is far from the horizon for fine wool returns, as prices continue to trend lower as consumers around the world struggle to find cash to spend on fancy clothes.
Going into the Easter selling recess the Eastern Market Indicator was down 10c/kg in recent sales, finishing last week at 1142c/kg.
In April 2021, the EMI sat at about 1300c/kg. By April 2022 it had moved to 1375c/kg, before returning to 1300c/kg by April 2023.
While broad crossbred wool continues to sell at subdued rates, it is the 17-19 micron fleeces that have sharply lost value, trending down since mid-2022.
According to Australian Wool Innovation, it is the finer end of the wool market that is getting the roughest deal, with carding and crossbred wool selling “quite well” in recent weeks.
“Price levels for the superfine Merino wool of 18.5 micron and finer continue to feel the brunt of the muted global discretionary spending,” AWI reports.
“As such, our key European luxury apparel makers are extremely cautious and selective in the auction centres.”
That has weakened competition across the finest wool, which makes up about 34 per cent of the total Australian wool production.
But, AWI noted that some of the big worsted mills and top makers in China had stepped into that space and had absorbed much of the better wool offered.
“Going forward, if the Chinese get a taste for the better and finer quality wool, we could see some stiff competition return to this sector when Europe and indeed the global economy returns to normality,” stated AWI’s market report.
ANZ analyst Alanna Barrett said after countries stopped stimulating economies, coming out of Covid, demand for luxury high-end fashion had faltered and not yet recovered.
Consumers had less discretionary income, she said, and without a global economic recovery and an easing of cost of living pressures, fine wool prices were yet to return to their premium levels.
Three years ago 17-18 wool was returning premiums about 400c/kg above current rates.
Independent Commodity Services consultant Andrew Wood said I “suspect we are at the bottom of the cycle, the question is now how long it takes (to recover), and I think that will be conditional on news of improvement in the major economies, or at least, in some of them”.
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