PERTH (miningweekly.com) – Weak commodity prices have led the top 100 Western Australian listed companies to have a 1.2% decrease in their market capitalisation at the end of October, with advisory firm Deloitte’s WA Index closing at A$141.7-billion at the end of the month.
A 6% rise in aluminium prices provided some relief, Deloitte said on Friday, while the price of crude oil dropped a further 10%, and had declined a total of 23% over the past two months, to levels most analysts and commentators alike did not expect.
Precious metals also fell, including gold by 4%, as investors reacted to the US Federal Reserve’s decision to end its monetary easing policy due to the continued positive outlook of the US economy.
“There has been very little relief for major iron-ore and oil producers, which have been balancing increasing production to boost profits and gain market share, and oversupplying the market. It is likely that we will continue to see depressed iron-ore and oil prices,” said Deloitte Western Australia clients and markets partner Tim Richards.
Aluminium rose by 6% on the back of reduced output by key western producers and Chinese smelters. Richards noted that the price increase was further amplified by higher demand from the automotive industry as demand for improved fuel efficiency pushes manufacturers to search for lighter alternatives to steel.
There was no good news for oil in October, with prices decreasing by 10% to close at $85.80/bl. Increased production from the US shale oil boom, coupled with Opec’s unwillingness to scale back production flooded the market with greater-than-expected supply.
The oil price slump was further driven by the continued appreciation of the US dollar, making purchasing oil in the currency more expensive and thus further decreasing demand. Richards said that given the political dimension to oil production, only time would tell how long the major oil producers were willing to maintain production, and therefore suppress prices.
“While lower oil prices have a negative impact on economies and indices with a significant exposure to the sector, the opposite can be said for manufacturing-based economies, which benefit as a result of cheaper energy prices,” Richards said.
He noted that the majority of equity markets surveyed in October posted positive results, with the All Ordinaries posting the biggest gain, increasing by 3.9%. The Deloitte WA Index and the FTSE 100 were the only ones to record a loss for the month, both declining by 1.2%.