13
JANUARY 2015
ACT
BUSINESSNEWS
AUTHOR:
CHRISSLEIGHT
is
one of theworld’smost
internationally renowned
construction businesswriters,
with specialist expertise in
financial markets and stock
market analysis. He is editor
of KHL’smarket-leading
International Construction
and
is a regular contributor to
ACT’
s sister publication,
International Cranes
and Specialized
Transport
.
The fall in the price
of oil inNovember
helped themarkets
to their traditional
end-of-year rally,
but once again the
heavy equipment
sectormissed
the party.
Chris
Sleight
reports.
N
ovember and
December saw
theprice of a
barrel of BrentCrude oil fall
below the $70mark for the
first time since 2008. The
expectation frommany is that
the oil pricewill stay at these
relatively low levels –or even
lower – throughout 2015, and
this prospect has provided
a significant boost to stock
markets.
A lowoil pricemeans
low energy costs, so it is a
massivepositive formany
businesses. It is anegative for
oil companies andothers of
course, but the overwhelming
impact is positive for the
economy.
This iswhy stockmarkets
shot tonew levels as 2014
came to an end. At the time of
writing inDecember, theDow
had just set a series of new
recordhighs above 17,900
points andbreaking the
18,000-point barrier looked a
real possibility.
More strikingwas the steep
growth seen in theNASDAQ
index, whichwas up in the
4,700 territory.Unlike the
Dow, thiswas not a record
high– thatwas set at 5,132
points inMarch2000.
However, the recent spurt
has still pushed the index to
more than20percent year-
on-year growth.
Although theheavy
equipment sector, as
representedon the graphby
the
ACT
HeavyEquipment
Index, did see someuptick
from thedrop inoil price, it
was not as strong as that of
themajormarkets.
A fall in commodityprices,
includingoil, is arguablymore
of amixedblessing for the
heavy equipment industry.
On the onehand, lower
energy costsmean it is
cheaper tomanufacture,
transport andoperateheavy
equipment.On the other
hand, the extractive industries
are amajor endmarket for
thesemachines, so a fall in
price (demand) does not
necessarilybodewell for the
sector.
ACT Heavy Equipment Index (HEI)
DOW
NASDAQ
S&P500
25%
20%
15%
10%
5%
0%
-5%
% change
52weeks to January 2015
Outlook
The fall inoil prices in
Novemberwas triggeredby a
meetingof theOrganization
of PetroleumExporting
Countries (OPEC)which
saw this super-national cartel
decidenot to cut production
in the face ofweakening
global economic growth.
Thismarked somethingof
a reverse from theprevious
post-crisis years, whereOPEC
quotas have kept the oil price
highdespite the obvious
weakness in theworld.
Some view this action
as apricewar against the
threat of increasing shale gas
productionondemand for
oil.However, it is also the case
that additional productionof
oil has come on line recently,
particularly in theU.S. So
somewould argue it is a
simple case of excess supply
andweakdemand for oil.
Whatever the true reasons,
the outlook is for aperiodof
lowoil prices, which should
stimulatemany stocks and
economies.
■
ACT’
s Heavy Equipment Index
(HEI) tracks the performance
of eight of America’smost
significant, publicly-traded
construction equipment
manufacturers – Astec
Industries, Caterpillar, CNH,
Deere & Company, Joy Global,
Manitowoc and Terex.
Year-end rally
