What Happened to Iluka’s Share Price?
Shares in mineral sands producer Iluka [ASX:ILU] fell around 8% today on the back of a weaker than expected first quarter production report. Output was down 24% on the same period last year. Revenue fell 12%, or a massive 51% compared to the December quarter.
Why Did This Happen to ILU Shares?
Iluka blamed the fall on weak Chinese demand over the Chinese New Year period. However, compared to the same period last year (which also included the traditional New Year slowdown), production of zircon and rutile dropped 16% and 39% respectively. That suggests more than just a seasonal slowdown.
What Now for ILU?
ILU’s mineral sands products are used in things like paints and ceramics. Like in most commodities, China is the main influencer of demand. ILU is tied to the commodity cycle, and its share price performance reflects that fact.
It peaked in 2011 at just below $20 per share. Then it entered a long bear market, falling to nearly $5.50 in December last year. Throughout 2015 ILU has rallied strongly, reaching close to $9 before falling back recently and further today on the worse than expected production news.
Despite the recent weakness, the share price is in a fledgling upward trend. If the commodity complex is close to bottoming, it might be worth a punt to pick up some shares on the recent weakness. It’s a high risk bet though as there doesn’t appear to be much in the way of positive catalysts for the commodity sector.
for The Daily Reckoning