WA’s mineral and petroleum industries set a new income record in financial year 2014 in the face of soft global demand for commodities.
According to statistics released by the Department of Mines and Petroleum (DMP) in mid September, WA’s resources sector raked $121.6 billion into the state and national economies in FY2014; a near 20 per cent increase on the previous financial year.
DMP pointed to Australia’s weakening dollar, which averaged US$0.92 for the period, as the primary ground for the results, with a 10.5 per cent drop against the greenback working to offset falling commodity prices.
“Traditionally perceived as a commodity currency, the Australian dollar decreased inline with falling commodity prices and therefore shielded producers to some extent from lower prices,” the DMP review stated.
“Increased output, the result of considerable investment in resource projects, also boosted the end result.” Iron ore was the standout commodity, accounting for a record $73.7 billion (78 per cent) of WA’s total mineral sales in FY2014 — 31 per cent increase in sales year on year.
“Project expansions, together with strong demand led by China, saw iron ore achieve record levels of export quantities. “This resulted in 631 million tonnes being exported, which was an increase of 23 per cent on the previous financial year.”
Other highlight performers included gold and petroleum with sales of $8.8 billion and $26.5 billion, respectively.
“The dominance of the resources sector in the nation’s economy is expected to continue given the number of projects which have been expanded or developed, in particular iron ore and LNG.”
“However, investment levels in the state’s resources [sector] will decline as many projects which were under construction will transition to the operational phase.” Meanwhile, global financial advisory Deloitte said its WA Index had fallen in the opening months of the new financial year due to sinking iron ore prices and slowdown in Chinese demand.
The market capitalisation of WA-listed companies decreased 1.9 per cent in August, to close the month at $154 billion. Deloitte clients and markets partner Tim Richards said the fall was due to a “mixed month of commodity prices” in which base metals recorded mostly steady gains, while iron ore fell significantly.
Iron ore’s plunge – which totalled 7 per cent in August to close at US$89 per tonne – was due to concerns surrounding the strength of the Chinese economy, after its manufacturing sector released weaker than expected data.
“WA’s reliance on the Chinese economy has come to the forefront this month, with concerns surrounding the outlook from the manufacturing powerhouse affecting resources companies in the WA Index,” Mr Richards said.
Iron ore’s market value has fallen 35 per cent since the start of the calendar year, and closed at a five-year low in August. “The decline is attributable to a combination of sluggish Chinese property prices and oversupply by major exporters – in Australia and Brazil – driving Chinese stockpiles to record highs,” Mr Richards said.
Base metals tin and copper both experienced losses due to a market correction which had followed months of significant gains. Uranium, with a 9 per cent increase, posted the biggest gain after Cameco Corporation temporarily closed McArthur River mine (one of the world’s biggest sources of uranium) due
to industrial action.
DMP stated WA had about $160 billion worth of resources projects under construction or in the committed stage of developmen as of September 2014, and a further $108 billion allocated to planned or possible projects in coming years.