Markets ahoy. A falling US dollar usually results in a commodity price rise. So, as expected, gold jumped overnight when the greenback fell 0.7% (and the Aussie topped 72 US cents). But copper, the great global and China growth indicator, continued its fall towards US$2 a pound and oil also dipped back towards US$40 a barrel in the US. That was a more telling reaction than what happened to gold or markets in Australia or Europe. US markets went sideways. But there was one other indicator that moved lower last night, which tells us a lot about the outlook for bulk commodities such as iron ore, coal and bauxite. The Baltic Dry Index, a key measure of the cost of shipping bulk commodities, hit a fresh low overnight, past the lows it reached in February. The index fell to a new low of 504, less than half the level of 1296 it was at this time last year, and more than 20 times lower than the peak of 11,648 it hit in 2008.Compounding the problem is the oversupply of ships. Shipping costs for Australian iron ore exporters to China are now as low as US$5 a tonne. For Vale in Brazil, it is still around US$12 a tonne because of the greater distance.

Iron ore exports from Australia are still at near-record levels, and yet this is having no impact on freight rates or the index. But demand for oil tankers has also risen, even though prices are low. While demand for oil and oil products is stronger than for coal and iron ore, much of the demand is coming from producers and traders who can buy oil and diesel and jet fuel cheaply, store it in supertankers and make money by selling it forward into Europe and the US or China because futures prices are in what’s called contango (forward prices are higher than the spot price) and its money for jam. You can’t do that with iron ore or coal. — Glenn Dyer

IPO madness. Overnight, two hot stock floats on Wall Street were priced, and they tell us an odd story about valuations. The first was the online dating site Match (owner of Tinder, OkCupid and others) which raised nearly US$400 million by selling 33.3 million shares at US$12 each, in its initial public offering. That was the low end of its expected range. And Square, the payments system company, sold 27 million shares at US$9 each. So US investors put more value on lonely hearts (Match) than on paying for trying to fill that void (Square). But that was not how the real market assessed it.

Square is actually an interesting business, with over $500 million a year in revenues (up 50% in the past year), its making losses, but growing rapidly. It’s only negative is that Jack Dorsey is its CEO, but he has returned to his previous hit, Twitter, which has Square investors worried. Match, though, is an even bigger business — revenues of US$888 million in 2014 and profits (how cute, real profits) of nearly US$150 million. So how did they go on the first day of trading overnight — Square shares jumped 45% to US$13.07, and Match was up a more sedate 22.8% to US$14.74. The gains stood out on a day when Wall Street went sideways. But what really stood out is how badly the so-called experts on Wall Street and in the US tech space got the original pricing wrong. Hundreds of millions of dollars in value was left on the table in the pricing of both floats. — Glenn Dyer

NSW’s new toll turkey? There were two instances this week that raise serious questions about the financial and managerial competence of the Coalition government in NSW run by premier Mike Baird, the brightest premier in the state firmament (and the man who managed to overshadow then-PM Tony Abbott with ease). Taking the second example first: the huge new Sydney road system called the WestConnex. When it was first proposed back in 2010, the 33-kilometre WestConnex toll road system through the heart of Sydney was going to be a $10-billion project, and as it has progressively firmed up, the costs have kept on rising, until this morning when it became a $16.8-billion project — $1.4 billion more than the previous forecast last year. It is still at least eight years from completion, meaning quite a few taxpayers will die before they have a chance of using it. — Glenn Dyer

Dull Opal’s fault lines. The second example appeared on Thursday and its the Opal transport card system that is proving a problem for some types of transport, especially Sydney buses and ferries. The NSW Auditor General revealed that the Opal system is working, and working so well that it has cost the government $189 million in lost revenues (the Opal card allows commuters unlimited free trips after the first eight paid journeys each week). As well, the Opal card readers keep breaking down and the report says that over half the15,000 breakdowns in the past year happened on Sydney buses. The NSW government’s revenue from public transport fell almost 3% in the year to June despite a fare rise and increased patronage. As well, a quarter of all Opal trips — or 74 million — were free, with around half of all ferry journeys were free, as were about a quarter of trips on buses and trains. — Glenn Dyer

Peter Fray

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