Australian wool prices have dropped just 0.6 per cent in the past week, according to the latest data from the Australian Wool Innovation Limited’s (AWI) Eastern Market Indicator.
The Indicator dropped to $15.77 per kilogram, down from last week’s six-month high of $16.09. However, prices will be under pressure if the lock down in China continues it may become increasingly expensive to export wool, and other products, to China due to declining ‘backloading’ opportunities on ships.
AWI also noted some brokers have been offering a week’s grace on payment to buyers whose shipments are delayed.
“This is most helpful and appreciated by exporters with delayed contracts, but obviously not the panacea to the larger potential issue,” AWI wrote in its latest commentary.
“One of the major roadblocks on the horizon for wool export, will be the immediate lack of containers and vessels arriving from China. The shipment of wool relies on the import of goods from China into Australia to get the wool back to Chinese factories. This is relevant not just for the physical transfer, but also for the discounted cost. Ships heading back to China are usually very competitive for freight rates and if we use the comparative analogy of a “backload discount” we enjoy at times in Australia in the trucking industry, these shipping costs have been exceptionally low for years.”
“Full container load rates are expected to have severe upward pressure placed upon them as well as the applicable port charges until the current China situation remedies itself. That’s all of course subject to vessel availability as authorities work their way through the ability or not of the virus to live and transmit contagions on non organic matter. Information from the Journal of Hospital Infection indicates from initial studies that the virus is able to live for at least a week on surfaces. Whether vessels and the [containers] on board are allowed to enter Australia or have a withholding period remains unknown.”