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PRICE DISCOMFORT

16th January 2015

By: Martin Creamer

Creamer Media Editor

  

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Weak currencies do provide a cushion in times of commodity price fall but the extent to which they are doing that in the current low price environment is, in the main, failing to take away enough hardness. What is worse is that the current commodity price fall does not appear to have ‘short term’ written on it, which prompted Investec Securities to comment in the junior iron-ore context that “the cushion may be soft but the chair is still hard”. It did so in the context of, for example, iron-ore junior Arrium seeking succour from the weak Australian dollar and Arrium CEO Andrew Roberts pointing out that every annualised decline of one cent in the Australian dollar against the US dollar translates into between A$11-million and A$14-million in earnings before interest and tax for Arrium – nothing to be sneezed at, but insufficient to remove the acute discomfort.

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