The Australian Broadcasting Corporation (ABCNews) reported on May 10 that although a “bubble” may not have occurred yet, Australian wool prices continued to rise after the Easter sharp increase, and the increase jumped another 6 percentage points at this week’s auction.
According to reports, the Eastern Market Index, an important standard for the wool industry, rose 69 cents to A$12.41 per kilogram over the weekend, a level not seen since mid-2012. After Easter, especially the strong demand from the Chinese market and the support from European and Indian buyers, Australian wool prices continued to rise sharply.
Analysts pointed out that China’s official decision to revitalize credit and bank lending capabilities at the end of April was a key factor in the rise in market prices for this commodity. China is the dominant player in the wool market, accounting for about 75% of the market share. Wool producers are cashing in on the booming market, with even previously locked-out producers rushing into the market. This year’s wool supply has increased by 8% year-on-year, and the growth rate is expected to reach 15% in the next three years.
Peter Morgan, executive director of the Australian Council of Wool Exporters, said that such a high increase in wool prices at the auction – especially the 4% price increase on Wednesday – was really “astonishing to everyone.” He said the positive sign is that this round of price increases does appear to be driven by demand.
According to reports, the last time prices in the Australian wool industry rose sharply were four years ago, when the Eastern Market Index climbed to A$14 per kilogram. That was the result of new demand as Italian buyers re-entered the wool market after the ballooning wool supply during the financial crisis was exhausted.
