The week ending December 9th registered the largest weekly rise for the EMI in 18 months - surging by 54c, to sit at 1,278c/kg. China, which accounts for close to 90% of Australia’s wool exports, has been the key influence on the EMI indicator, as sustained COVID-19 restrictions has placed downward pressure on the Australian wool market.
However, the kick in the EMI price indicator last week was a direct result of the announcement of China easing restrictions. This was the first step in removing uncertain demand and volatile price levels which have been a key feature of the market. Chinese purchasing activity dominated the broader wool market, with the impact reflected on the AuctionsPlus wool trading platform, with over 1,800 bales selling - doubling the volume traded the previous week.
Higher total bales sold on AuctionsPlus further highlights the turnaround in the market, as the moving EMI weekly change and bales sold on AuctionsPlus are strongly correlated. Wool trade data for the previous six months (Figure 1) denotes the willingness of buyers to secure bales on the AuctionsPlus wool trade platform when the value of the EMI rises.
Figure 1: Bales sold on A+ and the weekly % change in EMI.
(EMI Source, AWI)
Across 2022, AuctionsPlus has seen total bales sold back 37% on last year, with over 18,000 bales sold. The second week of December saw the largest weekly volume of bales traded on the platform, with 1,865 bales sold. Diving further into AuctionsPlus WoolTrade insights in 2022, offerings have been dominated by finer micron wool, currently averaging 19.56µ, while the three-year average sits at 19.46µ. Figure 2 below further highlights micron selling proportions, with 43% of bales sold in 2022 between 19µ and 20µ micron, followed by 17-18µ micron range accounting for 28%.
Figure 2: Proportion of microns traded on the AuctionsPlus wool platform in 2022.
Historically, January has recorded the largest number of bales sold through AuctionsPlus, with the recent positivity in prices and bales sold a welcomed trend heading into the three-week recess over Christmas. Despite strong sales predicted in January, it remains to be seen if the recent increase in price and volume will carry forward into 2023, as economic pressures from China and Europe also weigh on the value of the wool market. The stabilization of economic conditions overseas will be an important factor going forward, where increased confidence in the market will underpin an uptick in prices and help combat recent volatility.