WA Index January 2019

Article

WA Index

Issue 182 | February 2019

Welcome to the 182nd edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.

The market capitalisation of Western Australian listed companies increased by 6.9 per cent to close the month at $167.4bn for January. This movement was primarily driven by the 17 per cent rise in the spot prices of both Crude Oil and Iron Ore, resulting in increased market capitalisation of commodity giants including Fortescue Metals Group (up $4.5bn) and Woodside Petroleum (up $3bn).

Download the list of WA’s top 100 listed companies, as of 31 January 2019, explore the sections below and if you do not currently receive our WA Index, please register to be added to our distribution list.

Highlights:

If you have any questions in relation to the Deloitte WA Index please contact Dave Andrews.

As of 31 January 2019

Commodity review

The commodity market experienced mixed price movements in January. This month the WA Index Commodities Review focuses on cobalt, nickel, iron ore, crude oil and Liquid Natural Gas.

Key commodities surveyed during January:

  • Nickel prices have increased by 17 per cent to close at US$12,407 per tonne at the end of January, representing a three month high for the commodity. Prices surged as hopes rose the U.S and Chinese relationship may mend, the supply deficit continued to deepen and hints appeared that the period of U.S. dollar strength may be coming to an end.
  • Iron ore prices have increased 17 per cent in January, closing at US$85/tonne. This movement comes off the back of increasing Chinese steel demand and the easing of steel production restrictions. Uncertainty over the outlook for Brazilian ore supply has put upward pressure on prices after the Vale dam disaster in Brazil.
  • Crude Oil (Brent) prices have increased a considerable 17 per cent to close at US$62 per barrel at 31 January. This increase marks a two-month high for the oil price, on the back of supply restrictions across the globe. The announcement of US sanctions on the Venezuelan oil industry led to an increase in prices while Saudi Arabia, as the de-facto leader of OPEC, also announced supply cuts late last year intended to constrict the market and prop up prices.
  • Liquid Natural Gas (LNG) prices have dropped 12 per cent during January to close at US$8 per mmbtu. The price was pulled down by a well-supplied market, boosted by storage withdrawals and the likelihood of further LNG deliveries. This decrease has been despite the northern-hemisphere winter, which typically increased demand.
  • The Cobalt price fell 38 per cent during January to close at US$34,000 per tonne as supply increases. Glencore, one of the largest Cobalt miners in the Democratic Republic of Congo flagged its full year production for 2018 was 54% higher than 2017, following the Katanga restart.

Commodity and Precious Metal Prices
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Performance of WA Index and global indices

Performance of WA Index and global indices
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Global indices surveyed were strong in January, with the U.S S&P 500 leading the way with a 7.86 per cent increase for the month. US growth was primarily driven by a more accommodating posture by the US central bank, which signalled the end of its interest rate-hike campaign. Investors clearly took confidence out of the Federal Bank’s pledge of patience on interest rates, easing concerns about tightened financial conditions.

This confidence was supported by news trade tensions between China and the US showed positive signs of being resolved, with negotiations in Beijing hinting the long term stand-off was coming to an end. The US sentiment flowed through to the Nikkei and All Ords, which were buoyed by the S&P 500. The FTSE’s relatively high exposure to commodity stocks allowed the market to outperform European rivals, in light of a January rally in iron ore and oil prices.

WA Index movement

WA Index movement
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Major index players in January:

  • Fortescue Metals Group Limited’s market capitalisation has increased 34.7 per cent in January to close at $17.4bn at the end of the month. Growth has been driven by an increase in global iron ore prices as a result of strong global demand, as well as supply constraints from the Vale dam disaster in Brazil, which has shocked Brazilian output. Vale reacted to the disaster by deactivating 19 dams, decreasing their iron ore supply by 40 million tonnes. Fortescue also announced that production in the December 2018 quarter increased, whilst costs of production decreased.
  • Mount Gibson Iron Limited has seen a 20.6 per cent increase in its market capitalisation for the month, closing at $727.8m. Positive speculation around the “High-grade Koolan Island Restart Project” currently nearing completion has fuelled this growth. In addition, sales made for the December 2018 quarter were on track to meet targeted revenue, which drove further positive sentiment in the ore producer.
  • A strengthening cash balance and successful exploration results is behind a 15 per cent increase in Saracen Mineral Holdings Limited’s market capitalisation for the month. A rise in gold prices helped improve margins which further contributed to recent growth.

Major index players in January 2019
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Top performers of the month

Western Australian top performers over the past month by growth in market capitalisation

Top performers of the month
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The top Deloitte WA Index Movers and Shakers in January were as follows:

  • Galena Mining Limiteds market capitalisation increased 93.7 per cent to close at $104.5m at the end of January, entering the Deloitte WA Index top 100 for the first time. The increase followed the announcement of the sale of a 40 per cent stake in Galena’s wholly-owned subsidiary, Abra Mining Pty Ltd (AMPL) to Japan’s Toho Zinc for $90m. The equity was needed to develop the Abra lead-silver project in WA’s Gascoyne region.
  • A 68.6 per cent increase in MC Mining Limited’s market capitalisation was attributable to the 70m Rand (A$5m) acquisition of the Lukin and Salita properties required for the Makhado coal project. This acquisition enabled MC Mining to achieve significant milestones on the Makhado project.
  • Image Resources NL has increased its market capitalisation by 46 per cent to $153m in January. The strong growth followed the company’s transition into an active producer, earning its first revenues from the Boonanarring project. The company recently completed the loading of the first bulk shipment of 10,000 wet metric tonnes of heavy mineral concentre from the zircon-rich mineral sands deposit, located 80km north of Perth. 

If you don’t currently receive our WA Index, you can register to be added to our distribution list.

If you have any questions in relation to the Deloitte WA Index please contact Dave Andrews.

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