Chinese Holidays Driving Demand For Wool in October

The wool market saw a tremendous run-up last week and the pressure increased as each hour drew closer to start of the wool auctions.

Looking back at the period leading up the sale tells quite a story. On Thursday 8th October after the previous sale week, the price levels from China were sitting at levels below the close of the market which led many traders to believe that the following week’s market wouldn’t see much upside and possibly a slight easing. The following day on Friday afternoon, Chinese users had raised their levels to around the market close and traders’ felt this was a more confident sign that the wool market would be at least solid. Over the course of the weekend, Chinese users had increased prices being pitched at the traders’ here but they were becoming more cautious, sensing the risk of selling too much and being caught in a squeeze. By the evening of Monday 12th October there were even higher levels on offer from China for those game to take the challenge as Chinese users tried to get more quantity locked in. Tuesday morning before the wool sale, there was a buzz around that we hadn’t seen in a long time and buyers were preparing to bid up to get some inventory. That day the market ran well up to realise gains of up to 60 cents on most merino types and superfine types even more so. In the late afternoon and evening, traders’ saw more frantic activity from China which again threw levels well over the closing quotes and more business was concluded at premiums to market levels. Wednesday the 14th marked another strong rally and after the east closed and Fremantle opened the market eclipsed the levels in the east – often a good indicator of a bullish market.

So, what are some of the factors driving this rising market?

Two weeks ago, was Golden Holiday week in China, a week-long holiday to celebrate the country’s National Day. More than 600 million Chinese tourists travelled domestically this year during Golden Holiday week, injecting 466.6 billion Chinese yuan (about $96.4 billion) into the economy, according to the Chinese Ministry of Culture and Tourism.

Golden Holiday week leads up to another significant Chinese public holiday, Global Shopping Festival which is held on November 11. Previous well-known as Singles’ Day due to 11.11 resembling for ‘single sticks’ – a Chinese term used to refer to bachelors. Global Shopping Festival is now the largest online shopping day in the world here the retail industry expects there to be big movement of product, which has fabric and garment manufacturers wanting to replenish stocks in anticipation of a big sell-down.

Demand in China continues to be for knitwear, however there have been some indications that double face fabrics are becoming popular again (supportive of the merino carding types), and even some talk of more interest in fake fur which could help crossbred wool particularly under 29-micron.

Given the momentum and interest from China (our other main markets of India and Italy still extremely subdued), Fox & Lillie are expecting a very positive market this week.

This was featured in the Stock & Land ‘Bulls Run in October‘.

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