Australian wool prices a casualty in US-China trade war
YENNORA, Australia, Aug 15: Wool prices in the world's dominant exporter, Australia, are plunging after Chinese mills closed their order books, with buyers citing an escalation in the US-Sino trade war.
The price of wool grades popular with Chinese garment makers fell by up to 7per cent at auctions across the country on Wednesday, sales reports show. Those same grades - popular with Chinese garment-makers - fell by double-digits a week ago.
Across all grades, the southern Melbourne market suffered its biggest daily fall on Wednesday since 2003.
"Last week fell heavily and it certainly will continue this week; there's just no confidence and no business," said Scott Sealy, a trader at Australian Merino Exports, which exports large quantities to China.
The price action is another sign of the Sino-US trade war spilling over to third parties such as Australia, which controls 90 per cent of global fine-wool exports.
Demand, once driven by Italian garment makers, now tends to be set by Chinese wool mills who took more than two-thirds of the industry's A$3.2 billion ($2.2 billion) in exports last financial year, according to government figures.
This week's official wool price results won't be known until the end of the week when results from all major selling centers are in.
But sales reports issued from the three main selling centers - Sydney, Melbourne and Fremantle - from Wednesday's auction are gloomy.
While wool indicator prices suffered their biggest drop at the Melbourne auctions in more than 15 years, more than half of the merino fleece bales for sale in Western Australia's Fremantle auction couldn't find a buyer.
"By day's end, over 55per cent of the fleece was passed in, on top of the 20per cent withdrawn prior to sale," an Australian Wool Exchange report said.
The benchmark price for fine Australian merino wool was already down more than 20per cent from last year's high of $21.16/kg coming into this week's auctions.
Wool brokers at the Sydney auction on Wednesday were visibly bemused by the bidding, where more than a third of wool bales were passed in, unable to meet reserve prices.
There were also audible groans from farmers sitting in the public viewing area, who have been relying on income generated from fleeces to survive the country's devastating drought. -Reuters