Photo by: Bloomberg
PERTH (miningweekly.com) – The market capitalisation of Western Australia-listed companies fell by 2.4% during November, advisory firm Deloitte said on Wednesday, bringing an end to the gains recently experienced by companies making up its WA Index.
The companies making up the index closed November with a market capitalisation of A$145.5-billion.
Deloitte noted that commodity price falls weighed heavily on Australian markets, as the prices of precious and industrial metals tumbled during the month. Iron-ore producers propped up Western Australia stocks from a further fall, with producers Mount Gibson Iron and Atlas Iron posting gains of 17.4% and 10.6% respectively, on the back of strengthening iron-ore prices.
The majority of commodity prices surveyed fell during November.
Minutes of the US Federal Reserve’s October meeting were released in November, indicating that central bankers are likely to start scaling back monetary stimulus in the next few meetings as a result of positive US labour data.
“The news of strengthening US macroeconomic data has sent mixed signals to commodity markets,” said Deloitte’s Western Australian lead audit partner, Tim Richards.
“While the strengthening labour market is generally seen as a favourable indicator for economic activity and demand for Australia’s commodities, the ramifications of that same economic recovery includes a potential tightening of the US Federal Reserve’s stimulus package.”
Precious metals fell on the back of this news, as the demand for gold bullion as a safe-haven investment fell causing gold prices to fall 5.3% during the month.
Other precious metal prices followed suit, with silver falling 10.2%, while platinum and palladium fell 5.1% and 2.4% respectively. Silver continues to follow the trend of gold, despite having industrial uses in addition to being a safe haven investment, often resulting in more price volatility than gold itself.
Base commodities also fared poorly during the month amid concerns of a reduction in the US Federal Reserve’s bond purchasing programme.
Nickel prices, already suffering from a chronic oversupply and growing surplus, lost a further 7.6% during the month, while aluminium and lead fell 5.8% and 4.9% respectively.
Iron-ore prices, on the other hand, were lifted by strengthening Chinese steel production growth, with the World Steel Association reporting a rise in global steel production of 6.6% in October 2013 compared with October 2012. Iron-ore prices rose 3% during the month, despite record exports from Australia and the impending surge in supply expected on the back of recent project expansion announcements from iron-ore giants Vale S.A., Rio Tinto, BHP Billiton and Fortescue Metals.