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26 Feb 2015
Capex 2015-16 expectations: weak environment - BNZ
FXStreet (Bali) - The BNZ Team provides their market insights on what to expect from today's Australia Capex survey, noting that the outlook will be key today, even more than the actual spending for Q4.
Key Quotes
"The outlook part of the Capex survey will be just as, if not more, important than actual spending for Q4. This survey was polled in Jan/early February in the lead up to the Feb rate cut when speculation soared toward the end of January that the RBA was going to cut in February. In any case, it’s doubtful this would have had any noticeable impact on Capex budget decisions."
"While the evolving rates story may not have impacted plans, the downturn in major LNG project spending as they reach commissioning and shrinking oil and gas Capex budgets announced in the current reporting season will see a sector facing significant cutbacks in spending for the year ahead. Mining service industries are also feeling the squeeze, also under pressure from lower iron ore prices."
"By our figuring, the wind-down in Capex as the major LNG projects near completion could inflict in the order of a $20-25bn “Mining” cutback in Capex for 2015-16, in this the first survey for the next financial year. Our rough figuring suggests a 5th estimate for 2014-15 of around $150 bn, little changed from the $153bn surveyed last quarter. But for 2015-16, a ball park 1st estimate of around $110bn looks likely. Recall also that the Roy Hill iron ore project is expected to be coming on stream in the year ahead too."
Key Quotes
"The outlook part of the Capex survey will be just as, if not more, important than actual spending for Q4. This survey was polled in Jan/early February in the lead up to the Feb rate cut when speculation soared toward the end of January that the RBA was going to cut in February. In any case, it’s doubtful this would have had any noticeable impact on Capex budget decisions."
"While the evolving rates story may not have impacted plans, the downturn in major LNG project spending as they reach commissioning and shrinking oil and gas Capex budgets announced in the current reporting season will see a sector facing significant cutbacks in spending for the year ahead. Mining service industries are also feeling the squeeze, also under pressure from lower iron ore prices."
"By our figuring, the wind-down in Capex as the major LNG projects near completion could inflict in the order of a $20-25bn “Mining” cutback in Capex for 2015-16, in this the first survey for the next financial year. Our rough figuring suggests a 5th estimate for 2014-15 of around $150 bn, little changed from the $153bn surveyed last quarter. But for 2015-16, a ball park 1st estimate of around $110bn looks likely. Recall also that the Roy Hill iron ore project is expected to be coming on stream in the year ahead too."