PERTH – Orica, the largest supplier of explosives to the mining industry, has begun to observe stability in commodity markets that have been marked by volatility, sinking profits and job cuts after a global boom ended.
“We still see a lot of volatility, but I think that I’ve seen more stability than I’ve seen in some time,” in the past month, CEO Alberto Calderon told reporters after an industry briefing in Perth on Thursday.
“When I talk to our customers I get the sense they are saying ‘Well let’s get on with it’. They have done a very good job of cost-cutting. They just need to continue to grow, and that’s the behavior we are seeing.”
After declining for five years, the Bloomberg Commodity Index has increased 12% in 2016 as metals started to recover and energy rebounded. Last month, it moved less than 0.3% for the smallest change since 2012. In the medium term, Calderon, formerly a BHP Billiton executive, said that he saw iron-ore and coal prices staying depressed because of oversupply.
“It means there will be no big investments, no big capex, greenfield investments for a while in coal, iron-ore,” he said. Chinese iron-ore production may face further cuts of as much as 100-million metric tons of unprofitable output, he said.
Orica’s profit in the six months to March 31 fell by a third to A$149-million from a year earlier. It has cut its capital-expenditure forecasts and replaced a progressive dividend policy with a so-called payout ration, citing market conditions that had deteriorated more than anticipated.