Australian wool prices again rose in US$ terms this week, reflecting a much stronger demand in 2006. Very low wool stocks in China are also explaining the current rush for wool, whatever currency exchanges. Thanks to a rising euro, wool prices were not really higher in euro terms this week, in addition.
A wave of optimism is submerging the wool profession in Australia after prices this week rose in local currency terms, although the Australian dollar further increased against the US dollar.
The Eastern Market Indicator (EMI) gained 5 Australian cents per kilo clean, closing the two-day sales at 713 cents.
Prices again rose in US$ terms while generally declining in euro terms, however.
Market analysts are now giving a very long series of reasons for explaining the strength in the market this week.
China is forced buying
First, it appears that Chinese buyers anticipated lower prices after their May Day holidays.
Having waited for weeks for a softer tone in the market, they are now forced buying at higher prices, given the very low level in stocks at China's textile mills.
Second, the strength in global economic growth is giving a boost to retail sales and to demand for all micron ranges, as a result, including the medium micron wools.
Third, tight supply in Australia is supporting prices and the lack of fine wool will continue in the coming weeks.
A return to wool in fashion trends will further stimulate demand from Italy for finest qualities.
Prices of 18.5 microns dramatically rose in euro terms during the rally in January-February, as reflected by our graph below.
South Africa
Sales will return to Port Elisabeth next Wednesday.
China
Prices were mixed in Nanjing in yuan terms, while mostly rising in US$ terms after the new fall of the American currency.
