Wool prices are now clearly rallying, boosted by a possible rebound in demand for wool apparel at retail. Prices further surged this week in Australia and South Africa, although they were expected easing. More is to come in the next week with fine-quality wool sales being held in Lauceston, Tasmania.
Wool prices further surged this week in Australia. Benchmark Eastern Market Indicator (EMI) gained another 13 Australian cents at 704 cents per kilo clean, for the first time above 700 cents since last August.
The EMI rose 1 cent on Tuesday before surging 7 cents on Wednesday and 5 cents on Thursday.
A lack of supply is partly behind the coutinuous rise in prices in the last four weeks.
Widening gap
Fine wool prices are more rapidly increasing, with price gap between fine and broader categories returning to more usual levels, on a long term basis.
Average price for 17 microns was up 30 cents in the north while rising 21 cents in the south.
18.5 to 20 micron types are about 14 to 16 percent higher than two months ago.
This week's new surge in prices is a surprise for analysts, given the rise in the Australian dollar.
The EMI was up 10 US cents and 16 euro cents, as a consequence.
Much more wool than last week was on offer in addition, 61,000 bales compared with only 34,000 bales.
Demand from Korea and Europe was very strong with Australian topmakers also buying large quantities.
Demand from China
Woolmark analyst Peter Morgan said that China dominated auction sales this week while brokers said Chinese had left for holidays.
The level in Chinese demand in the next weeks will determine the future of the current rally.
Inventories are reported at low levels at China's textile plants and demand from China could increase in the short future, as a result.
China's wool textile industry may also reduce production, waiting for lower prices.
Prices are expected further rising in the next week with good quality fine-wool sales being held in Tasmania.
Demand for wool apparel could also be rising at EU and US retail. Fabric show Premiere Vision could confirm this trend at the end of the month.
Similar rally in South Africa
Prices further surged last Wednesday in Port Elisabeth, for the third consecutive week.
Cape Wools' market indicator was up 4.7 percent at 24.93 rand per kilo clean.
"Fine-wool prices surged as one the country's largest fine-wool clips came under the hammer," said the wool body in its weekly statement.
"The 19-micron category (long wool) gained over 5%, while most other categories rose between 1% and 4%."
