PERTH (miningweekly.com) – The market capitalisation of Western Australia-listed companies decreased by 9.3% in November, to close the month at $128.5-billion on the back of weaker commodity prices, advisory firm Deloitte said on Thursday, quoting figures from its latest WA Index.
Iron-ore and crude oil, two of the most significant casualties of recent commodity market turmoil, continued their downward movements decreasing 13.6% and 17.6% during November, taking their 2014 year-to-date decrease to 48.9% and 36.6% respectively.
“The iron-ore and oil price decline has continued this month with no floor yet in sight. With the market looking oversupplied, it is likely we will continue to see depressed iron-ore and oil prices for some time,” said Deloitte clients and markets partner for Western Australia, Tim Richards.
“This is having a significant impact on a number of entities in the West Australian market, with a focus on costs becoming an absolute necessity.”
Uranium was the best performing commodity, up 12.7%, fuelled by the news of Japan’s decision to restart two of its nuclear reactors, which have lain dormant since the 2011 Fukushima disaster. Analysts were predicting uranium would continue its upward trend, with further reactors in Japan awaiting approval to restart, and China expected to quadruple its nuclear energy output by 2020.
Meanwhile, precious metals had a mixed month, Richards said, adding that gold and palladium were up 1.4% and 3.2% respectively, while platinum continued its slide, dropping 1.8% to trade at its lowest price in five years. Silver also had a bad month dropping 4.8% to $15.60, a price not seen since January 2010.
Copper decreased 5.8% during the month impacted by weak manufacturing figures in China, while slower business growth in the eurozone raised concerns about demand. November saw zinc down 4.1%, impacted by the overall drop in commodities and the stronger US dollar, although supply and demand fundamentals remain in its favour going forward.
Iron-ore fell to under $70/t for the first time since June 2009, as a global supply glut and slowing demand in China's construction sector weighed on investor sentiment.
Richards said that the price slide was expected to continue as more supply was expected to hit the market in the New Year. Some analysts were predicting prices below $60/t, bringing more pain to Western Australia’s embattled midtier producers, and the raft of related support industries as producers scramble to reduce costs.
Furthermore, crude oil closed the month at $70.67/bl, a decrease of 17.6%.
Richards noted that while observers expected Opec to agree on a cut to oil production in a bid to boost prices, it had refused to budge, driven particularly by the Gulf States, with many speculating this is a strategy to put the squeeze on a booming US shale gas industry.
He added that this lack of action was bad news for oil-producing countries like Russia, Nigeria and Venezuela, which depended on prices of at least $90/bl to meet economic targets and debt repayments.