Shortage of wool drives the market

The wool market is bullish, witheveryone on edge, waiting to see when the cycle will turn. The general shortage of accumulated wool stocks in the wool processing pipeline – due to the economic depression – is having a strong positive effect on demand, said Martin Schwellnus, general manager for BKB’s fibre trading.

“The demand appears to be stronger on the finer side of the offering, that’s to say 19 microns and finer. The good production conditions in Australia mean there’s an upward movement in the micron offering, resulting in a larger offering of stronger types,” he said. Yet volumes to date are 7% down with a forecast of 14% for the current season.
“The high micron groups are well priced with little room for upward movement.”Rift Valley fever has brought South African exports to China to a halt and restrictions will apply up to July 2011 unless there’s an earlier resolution of the phytosanitary requirements between the two countries.

But BKB’s wool trading manager Basie Claassen said wool volumes are being stored in local brokers’ warehouses on behalf of Chinese buyers, in anticipation of the lifting of the export ban. “The expectation is that this stock will be protected against price reductions insofar as the exchange rate and Chinese economic measures to combat inflation will allow,” he said.

The exchange rate remains one of the most important drivers of wool prices and the weak US dollar makes the rand appear very strong, said Schwellnus. BKB predicts a stable to improved price on the finer side and a stable to slightly lower price on the 21 micron and stronger group.