Issue 156 | June 2016


WA Index

Issue 156 | June 2016

Welcome to the 156th edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.

Download the list of WA’s top 100 listed companies, as of 31st May, explore the sections below and if you don’t currently receive our WA Index, please register to be added to our distribution list.


If you have any questions in relation to the Deloitte WA Index please contact Angela McIlroy.

As of 31 May 2016

Commodity review

Movements in commodity prices for the month of May make for sombre reading, with declines in all commodities surveyed barring crude oil, coal and uranium. Continued poor performance is primarily due to increased supply coming online, whilst at the same time a depressed global economy led by decreased demand from China and emerging economies is also compounding the supply side effects. In addition the US economy continues to gain momentum which has resulted in an appreciation of the US dollar, which has a twofold effect on commodities, firstly making them more expensive for buyers paying with other currencies, and secondly by raising the cost of borrowing for companies with US dollar debt.

On a positive note the supply glut that threatened to keep crude oil prices at historic lows continued to soften in the month of May. This was caused by unplanned outages with some of the big exporters due to a resurgence of militancy in Nigeria, and wild fires occurring in Canada. These unforeseen outages led to an increase in the crude oil price of 3.7% over the course of the month.

Iron ore prices slumped to US$51 per tonne after reaching highs close to US$70 per tonne in April. The iron ore price followed a decrease in the pricing of iron ore futures. In addition significant iron ore inventories in Chinese ports totalling 100 million tonnes curbed any chance of a further advance during the month. 

Gold and silver prices decreased by 6.0% and 10.4% respectively. Gold declined after Federal Reserve Chairwoman Janet Yellen advised that an interest rate hike is likely if positive economic data regarding the US economy occurs as expected.  Any increase in US interest rates would move demand away from non-interest bearing assets such as gold and also increases the demand for the USD. Silver decreased largely for the same reasons, impacted by the sentiment switch due to potential US interest rate increases and the effect of an appreciation in the USD.

Palladium prices decreased 14.0% in the month of May on the back of concerns around excess supply. However it must be noted that only globally exchange traded palladium stocks can be accurately estimated, throwing doubt on stock estimates which vary significantly. In addition both platinum and palladium have been adversely hit by a reduction in the jewellery demand from Chinese buyers.

It was a poor month for industrial metals with decreases for copper, nickel, aluminium, lead, zinc and tin. This has been largely predicated on poor economic data from China.  Nickel is still hampered by stockpiles accrued before the Indonesian export ban, in addition to weak demand from China.  Likewise copper is flailing due to lacklustre Chinese demand.  Another commodity to be hit by weak Chinese demand is aluminium. Given its largely industrial applications in commercial construction, automotive, aerospace, and packaging, a contraction in Chinese manufacturing activity does not bode well for the metal.

Lead prices also decreased by 6.1% during May. The price of lead is significantly weighted towards demand for lead-acid batteries in China. Two isolated regulatory changes in China, firstly a new tax imposed on lead-acid batteries in favour of more environmentally friendly batteries and secondly a crackdown on electric bikes amid road safety issues, caused the price drop in lead. Tin is largely sheltered from Chinese economic data releases as China is traditionally not a large importer of the commodity, but instead the steady increase of supply has relieved supply pressures.

Uranium prices remain steady, with the increase experienced during the month reflecting optimism in the long term demand for the commodity. However in the short term the market remains subdued, still overshadowed by the Fukushima nuclear disaster.  Coal prices also increased 4.9% during the month, on the back of a rebalancing in supply and demand. However there is a still an oversupply in the market, but not in all grades of coal.

Commodity and Precious Metal Prices

Select above image to enhance the Commodity and Precious Metal Prices
Select above image to enhance the Commodity and Precious Metal Prices

Performance of WA Index and global indices

Select above image to enhance the Performance of WA Index and global indices
Select above image to enhance the Performance of WA Index and global indices

WA Index movement

Select above image to enhance the WA Index movement
Select above image to enhance the WA Index movement

The Deloitte WA Index declined by 2.8% during the month of May, with the market capitalisation of Western Australian listed companies closing the month at AU$132.4bn.

Among the major Index players:

  • Northern Star Resources Limited’s market capitalisation rose by AU$264m (11.4%) during the month as the company continued on a stable path of growth, aided by a depreciating Australian dollar and strong operational performance. For the 2016 financial year, Northern Star budgeted to spend $74m on exploration and expansionary capital expenditure in order to expand production organically, with $18m spent in the March 2016 quarter
  • Pilbara Minerals Limited’s market capitalisation grew by AU$151m (25.4%) as a result of a number of events including continued positive exploration results at the Company’s flagship Pilgangoora project, increased interest by investors in  lithium , and the completion of equity raisings during the month
  • Galaxy Resources Limited’s market capitalisation increased by AU$99m (20.2%) during May, with the increase driven by strong market interest in lithium, and also the proposed merger with joint venture partner General Mining Corporation, which combined, would make the group one of the largest local lithium exploration and production company’s.

Most equity markets surveyed posted positive results in May:

  • The All Ordinaries gained 2.5%, largely driven by improved global sentiment, oil prices rising above $US50 a barrel, weak inflation numbers and an interest rate cut early in the month
  • The Nikkei posted the most notable improvement, increasing by 3.4%. The performance of the Japanese market was largely due to a weaker Yen and the increasing probability that what was thought to be an imminent consumption tax rise would be delayed
  • The S&P 500 rose 1.5%, with investors encouraged by a potential hike in US interest rates in June and an increasing perception that the US economy can endure a steady rise in interest rates
  • The FTSE 100 remained stagnant, decreasing slightly by 0.2%. In a volatile month, it was hit by results of Brexit polling that revealed voters favoured the UK leaving the EU, resulting in widespread selling of Pound sterling.

LED board

Top performers of the month

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

Select above image to enhance the Top performers of the month
Select above image to enhance the Top performers of the month

Top Deloitte WA Index Movers and Shakers in May included:

  • Atlas Iron Limited (AGO), which posted a 119.6% increase in market capitalisation from AU$61m to AU$135m. The positive performance was mainly attributable to recent debt restructuring, giving lenders a cumulative stake of approximately 70% in the company and an extended maturity date to 2021. The investor presentation released in May also resonated with investors, as Atlas Iron continued to cut costs and expand into the growing lithium market
  • Base Resources Limited (BSE), posted an 81.0% increase in market capitalisation, from AU$46m to AU$83m, on the back of positive announcements by its peers in relation to improving general market conditions for mineral sands
  • Lithium Australia NL (LIT), which posted a 73.1% increase in market capitalisation, from AU$55m to AU$95m. On 26 May, the company announced it had earned the first 25% in the Electra Project located along the Sonora lithium clay deposit in Mexico. This new and significant interest opens up exploration in a world-class area and allows the opportunity to advance a commercial processing technology applicable to lithium clay deposits.

Yellow road signal

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 Angela McIlroy.

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