Market Morsel: Supply chain congestion weighs on market
Weaker Fremantle prices last week proved to be a harbinger of weaker prices in the eastern selling centres this week. Congestion in logistics, leading to slower payments, is restricting the ability of exporters to buy wool. When this issue will be resolved or at least improve is unknown, with DHL stating that ocean (freight) scheduling reliability in December reached its lowest level since DHL began reporting this facet of logistics in 2011.
Some wool exporters think the situation has deteriorated since December. With this in mind, the large offering next week is likely to see a higher pass in rate, especially for faulty wool types, and lower prices. Beyond the shipping issues demand is quite good for merino wool both within and outside of China, reflected in buoyant prices for other apparel fibres generally. Fine merino premiums remain at very high levels, with some reports of price resistance occurring.
17 and finer prices on average held their own or lifted this week as the demand for fine merino wool continues, even for locks and crutchings. Cashmere prices are high, at their highest level since 2001 in Australian dollar terms which makes the finer merino prices look reasonable value in comparison.
The logistical problems made themselves felt this week pulling the bulk of the merino market and the crossbred market lower. Unfortunately it appears this issue will continue for the time being. That is a problem for the greasy wool market as it limits the ability of exporters to buy wool. The outcome is that prices will probably ease again next week.
The 21 MPG eased this week, towards the middle of its trading range. Exporter feedback indicates prices are likely to ease again, depending on pass in rates. It is likely to be a rough week for faulty types (low yield, high vegetable fault, colour, cott and so on) with RWS accredited wool likely to be the exception.
Already struggling, the crossbred market now has to contend with logistical congestion and the curtailed ability of exporters to buy and ship wool. Prices are likely to be weaker again next week.