Persistent weakness in already clapped out commodity prices is triggering a new round of asset value writedowns on top of the $US140 billion ($192bn) notched up by the global mining industry since 2011.
The new round is not expected to match the $US58bn impairment hit the global industry took in 2013 when it became clear that the decade-long China-led boom in prices and demand was over.
But fears that renewed commodity price weakness as 2015 has unfolded is structural, and will persist for the foreseeable future, has again put asset values under the pump.
Aluminium, coal, nickel and iron ore have retreated sharply from 2014’s already battered levels, prompting a new hard-nosed assessment of whether long-term commodity price assumptions across the industry are still valid.
Aluminium has been hit particularly hard. It is down 30 per cent on its 2014 December half average of $US2378 a tonne at $US1642.
Nickel has plunged more than 32 per cent from its December half average to $US11,300 a tonne — prompting not just discussion on asset values, but on the ability of a big chunk of the industry to survive.
Coking coal prices have slumped 18 per cent from the December half average while thermal coal has simply remained at depressed level of $US60 a tonne.
The more recent breakdown in copper, the industry’s bellwether metal, from the December half average of $US2.98 a pound to $US2.38 a pound, is a fresh cause for alarm.
That 20 per cent fall has come on the heels of iron ore’s 28 per cent plunge from the December half average of $US70 a tonne to $US50.
The ongoing weakness in mineral commodity prices reflects slowing demand from China at a time when oversupply is widespread.
The severity of the situation — and the expectation that it will not turn around in a hurry — has been reflected in the $90bn combined sharemarket value fall of BHP Billiton and Rio Tinto alone in the past 12 months.
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