Iron Ore Price Halves Again in 2015, Australian Markets Ease

Marcus Jacob
08 Dec, 2015
New York City

Australian markets struggled after a steep slide in oil and iron ore prices. Rio Tinto cut its forecasted capex for a third time this year. Woodside Petroleum terminated its $11.6 billion takeover proposal for rival Oil Search.

[R]5:30 PM Sydney, Australia – Australian markets struggled after a steep slide in oil and iron ore prices. Rio Tinto cut its forecasted capex for a third time this year. Woodside Petroleum terminated its $11.6 billion takeover proposal for rival Oil Search.[/R]

The Australian market dropped nearly 1% on Tuesday after oil prices slid near seven-year low and iron ore and coal prices declined on the rising oversupply and the sustained fall in demand.

Iron price declined to another low following the decline in oil price to a seven-year low.

Iron ore of 62% ferrous content for the delivery to China ports declined 1.3% to $38.90 a ton and dropped 25% since October.

Iron ore price in the year so far have dropped 44%, nearly matching the losses of 50% in 2014 after reaching $190 high in 2011 and averaging $135 in 2013 and dropping to $97 in 2014.

Business confidence recovered in November and conditions remain above average, according to National Australia Bank.

The monthly business survey of NAB showed that business confidence index rose to 5 in November, while business conditions remained at 10, stable for fourth months.

Rio Tinto plunged 4% after the miner reduced its capital spending plan for 2015 and 2016 again. Woodside Petroleum aborted its takeover bid for the smaller rival Oil Search.

The Australian dollar slid to 72.27 U.S. cents and trading turnover jumped to 957 million shares worth $4.9 billion.

At the market close, the ASX 200 Index dropped 47.10 or 0.9% to 5,108.60, while the broader All Ordinaries Index slumped 47.90 to 5,158.

In commodities trading, gold soared US$12 to US$1,073 an ounce and Brent crude future for immediate month delivery added 22 cents to US$50.95 a barrel.

Australian Stock Movers

Metals X Limited slipped 1.4% to $1.02 after the mining exploration company raised its takeover bid for mining company Aditya Birla Minerals.

Under the revised offer, the company proposed to exchange one Metal X for 4.75 Aditya shares and waived some of offer conditions.

Orica Limited slumped 3.7% to $15.02 after the mining services group said that an adverse court ruling on a tax matter will decrease its net profit by $36 million.

Orica faces charges for a $900 million tax-avoidance scheme it ran from 2002 to 2006 in an effort to increase its share price.

Rio Tinto Limited plunged 4.3% to $42.40 after the mining company cut its capital spending forecast for the third time in a year.

The miner''s capex for both 2015 and 2016 will be about $US5 billion, down from the already reduced plan of $US5.5 billion for 2015 and less than US$S6 billion for 2016.

Earlier in the year the company guided $US7 billion in annual capital spending.

Nevertheless, the company said it remained optimistic about iron ore demand and the miner is well placed to invest in its businesses and said Amrun project requires capital investment of $1.9 billion, scheduled over 2017 and 2018.

Woodside Petroleum Limited declined 3.9% to $26.89 after the oil and gas producer withdrew its $11.6 billion takeover bid for rival Oil Search Ltd.

Oil Search had rejected the offer in September, saying that Woodside’s proposal grossly undervalued the company.