All quiet, just waiting for a circuit breaker

THE market seems to be willing itself towards the recess, just maintaining the current level and everyone would like to be able to take a break and reset. 

Pricewise last week the market was dearer on the first day of selling, and then drifted lower on the second day as orders filled up and the selection quality was a little lower. 

Overall the AWEX EMI closed down 2c in local currency terms, lost 7c in USD and was 8 Euro cents down as well, so all pretty much within spitting distance of unchanged. 

Medium merino wool is facing perhaps the largest supply squeeze of all and so these types rose in comparison while the finer merino types eased a few cents. 

Ultrafine merino continues to power along with huge prices being paid for the cream of the clip and shining a light on an otherwise insipid market. 

Crossbred wool drifted lower but carding wools held their own or even went up by a few pennies. 

There seems to be a new problem arising each week around the globe adding to the uncertainty in consumers minds. 

Hopefully, the Christmas holiday period will provide a circuit breaker and allow a few regions to sort things out. 

The weather patterns appear to be heading into a normal winter scenario in the north ern hemisphere which can only be good for wool consumption. 

Northern Asia is forecasting single-digit maximums for the next 10 days, and Europe is bracing for a similar cool spell with plenty of snow falling in the Eastern reaches. 

Who knows what the weather gods have in store for Australian producers next season but hopefully it is a little more friendly for southeastern Australia than the challenging conditions in ’24. 

Supply will be a big talking point as the calendar flicks over in four weeks’ time. 

The updated production fore cast is likely to show a similar decrease for 2025/26 on the cards with record high slaughter numbers as well as the normal exit numbers from the industry which are getting more media coverage than is probably warranted of late. 

Still those remaining in the industry, just as they did after the early 90’s, tough times will reap the benefits of the upswing in prices when they eventually arrive as everyone in the industry expects. 

The cyclical upturn has been frustratingly slow to arrive, but for those who have been around for a while, each passing month adds to the certainty and probably the strength of its inevitability. 

Trading conditions for exporters and early stage processors remain tough as they have been for the past couple of months now. 

The lack of market movement makes it difficult to sell any volume on a forward basis, and the lack of cheap wools around makes it equally difficult to accumulate any attractive stock parcel. 

Inherently, traders like a market which is moving, one way or the other, so a market just drifting sideways for weeks at a time restricts the volumes they can turn over, leading to pressure on overheads and hence discussions about cost-saving measures which will probably not eventuate to much anyway. 

The indent business, where auction buyers simply fill a given quantity within price guidelines becomes the main game, supported of course by those processing mills which are large enough to have their own buying teams to procure their mill fodder. 

All the calculations are being done to ensure that they have enough wool in the pipeline to cover the three-week auction recess, and with South Africa already in recess the required numbers are significantly higher than in normal selling weeks. 

Greasy wool stocks in China remain incredibly low and any mill that plans to be operating in February, after the Chinese New Year. 

The usual delays around dumping and shipping at this time of year are being compounded by a general ocean freight increase, not directly on the Australia to China route where many containers go back empty, but due to the Congestion on the Asia/America route.

Shipping companies are seeing a marked increase in freight as exporters mainly from China try to get ahead of any increase in tariff when the new administration comes into power on January 20. 

So, as any good cartel does, they increase ship ping rates globally, just because they can. 

A lot of focus obviously is being directed at DJT and his almost daily utterings and pro posed political adviser appointments, but for the wool industry the place to watch remains Beijing in late January.

Quite often the Chinese government will announce some feel good policies just as the nation goes on leave for the Lunar New Year. 

They do this normally as a political manoeuvre to curry favour with the populace to ensure everyone returns home a bit happier with life, and more inclined to spend money and buy gifts and, therefore, pro vide a boost to the economy. 

They are obviously wanting to keep things close to their chest, more than normal this year, as they may need to react to any new Trump policies quickly, but the Chinese economy is definitely in need of a jump start. 

So, the wool market faces two more weeks of more-or less sideways trading through to the recess.

After sales resume in January we could be in a similar drifting pattern for the first three weeks as well until those in Beijing and Washington have drawn up the lines in the play ground and worked out who is on whose team.