MELBOURNE, May 21 (Reuters) – A spate of profit warnings from Australian mining services firms suggests the country’s “once-in-a-century” resources spending boom may have peaked sooner than companies, economists and policymakers had expected.
Australia has been bracing for a slowdown in its massive pipeline of investment for resource projects – liquefied natural gas, iron ore and coal in particular – as developments come on stream and as signs of a slowdown in demand from top commodities consumer China weigh on prices.
“The extent of the slowdown and just how fast the turnaround has been is a surprise,” said Savanth Sebastian, an economist at Commsec, noting the potential for more projects to be pushed back or mothballed. “It seems to have taken place in a very narrow window.”
With miners from BHP Billiton Ltd down shelving projects and slashing costs that grew out of control during the boom, they have turned the screws on contractors, in some cases dumping firms that are unwilling to cut prices. “They got carried away using too many contractors to get that extra tonne, almost like a credit-card mentality,” Tony Maher, mining division president of the Construction, Forestry, Mining and Energy Union, told Reuters.
The pain that first hit mining and engineering firms late last year has intensified more than expected, judging by the slew of negative revisions to profit forecasts.
Shares in Transfield Services Ltd sank as much as 24 percent on Tuesday to an all-time low of A$0.965 after the engineering firm cut its profit forecast by more than a quarter.
WorleyParsons Ltd, Boart Longyear Ltd, Transfield Services Ltd, UGL Ltd, Fleetwood Corp and Coffey International Ltd all slashed their profit forecasts over the past week, hammering their shares.
Transfield and its bigger rival UGL both blamed volatility in commodity markets and a slowdown of capital investment in resources and infrastructure projects.
Fleetwood, which provides housing for mining camps, plunged as much as 33 percent to a four-year low after warning there was now an oversupply of housing in one of Western Australia’s resources hubs, Karratha.
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