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Market Update

Plunge in Iron Ore Price in Australia May Trim Industry Capex


Author: Marcus Jacob
ticker.com
Last Update: 11:31 AM ET April 01 2015

5:30 PM Sydney – Australian stocks faced selling pressure after iron ore prices dropped to a new six-year low and to the lowest in the year. Australian building approvals declined for the fourth month in a row. Lend Lease was deemed as the highest bidder for a $1.6 billion building development project in Singapore.

Stocks in Sydney came under selling pressure after iron ore price declined to the low in the year and on weak international markets.

Iron ore prices for China delivery fell to US$51 a ton, after starting the year 2015 at US$68 a ton, a decline of nearly 25%.

Iron ore prices in 2014 plunged nearly 50% to US$68.

Iron ore prices are expected to fall further as China forces a slowdown in construction sector and steel demand stalls.

For now, BHP Billiton and Rio Tinto are not expected to alter their capacity expansion despite the sharp fall in the second year in a row.

BHP has targeted annual iron ore mining capacity to 360 million tons and Rio Tinto is looking to expand to 290 million tons. In addition, Brazil-based Vale SA is looking to expand its mining capacity in 2016 and 2017.

BHP and Rio are estimated to generate positive cash flow for iron ore price above $30 a ton and additional cost cuts may lower than price level to $27.

On the domestic front economic front, the seasonally adjusted total number of building approvals issued in February declined 3.2% to 18,768, fourth monthly decrease in a row followed by 7.9% climb in January, the Australian Bureau of Statistics said today.

On a yearly basis total approvals soared 14.3% compared to 9.1% jump in the previous month.

The department added seasonally adjusted estimate of the value of total building approved in February plunged 19.5% following a rise of 20.1% in January.

Australian dollar closed at 76.39 U.S. cents and in stock trading turnover dropped to 787 million shares worth $5.1 billion.

At close, the ASX 200 Index slipped 30.70 or 0.5% to 5,860.80 and the broader All Ordinaries Index fell 29 to 5,832.90.

In commodities trading, gold gained US$3 to US$1,187 an ounce and Brent crude fell 20 cents to close at US$54.91 a barrel.

IPO

Aeeris Limited declined 8% to 23 cents after the critical warning data services provider priced its stock at 25 cents. The stock opened at 25 cents and closed at 23 cents.

Australian Stock Movers

Automotive Group Holdings Ltd fell 0.7% to $4.17 after the diversified automobile retailer and logistics group agreed to acquire two new dealerships for about $5 million, Leo Muller in Brisbane and the Paceway Mitsubishi dealership in Perth.

Lend Lease Group gained 0.3% to $16.69 and the infrastructure developer and joint venture partner were deemed as the highest bidders to acquire large urban regeneration development site in Singapore worth $1.6 billion to develop for mixed use.

Lend Lease will own 30% of the joint venture, with the balance owned by investment partner.

Wide Bay Australia Limited jumped 2.9% to $5.35 and the financial services provider today was renamed to Auswide Bank Limited.

Triton Minerals Ltd surged 59.7% to 53.5 cents after the graphite producer secured a minimum 20-year binding sales agreement worth US$2 billion for exclusive rights to supply graphite to China-based Yichang Xincheng Graphite Co. Ltd

The contract agreed with the Yichang’s assures for minimum price of US$1,000 per ton, the supply will be from Mozambique, Madagascar, Malawi and Tanzania mines.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc