Photo by: Bloombeg
PERTH (miningweekly.com) – The market capitalisation of Western Australian listed companies fell by 2.2% and closed at A$119.3-billion in January, as commodity prices continued to remain slumped, advisory firm Deloitte said on Thursday.
“The Western Australian economy is intrinsically linked to the health of the global commodity markets and is being hurt by the continued slowdown in the Chinese economy and the decoupling of its future growth from the investment driven industrial model of the past,” Deloitte clients and markets partner for Western Australia, Tim Richards, said.
“Waning Chinese demand has contributed to the slump in commodity prices that is also exacerbated by increases in commodity supply, which are forecast to continue in 2016.”
In its latest Western Australian Index, Deloitte noted that iron-ore, which was of particular importance to the Western Australian economy, fell by 2.3% to end the month at $42.80/t due to the Chinese industrial slow-down and the associated decrease in steel production.
This was further intensified by the jockeying for market share among the world’s largest ore producers, increasing the availability of low-cost supply in the market with new mines coming on line, placing significant pressure on higher-cost producers.
Crude oil finished the month at $34.53/bl having dropped 3.3% during January.
Richards noted that uncertain global growth impacted demand while the US’s hydraulic fracturing revolution helped to move the nation towards oil autonomy. At the same time, supply had increased and would continue to do so as Organisation of the Petroleum Exporting Countries maintained production in an attempt to preserve their market share.
Sanctions on Iran had also been lifted, which would culminate in its re-entry into the oil exporting community.
Meanwhile, palladium decreased by 9.7%, as the metal fell victim to the recent stock market sell-off in China, the rising US dollar and minimal sustainable impact from record car sales on palladium demand.
However, gold was the shining light in the commodity slump, reporting a 5.2% growth during the month, which Richards said reflected its ‘safe haven’ status in an environment of low global income growth.