The combined market capitalisation of the 50 companies on the Deloitte mining services index dropped 6.74 points, or $A3.12 billion, to 68.59 points on the previous quarter.
The ASX 200 index increased 2.89 points to 132.15 over the same period.
Deloitte financial advisory services partner Nicholas Harwood said the decline was a flow-on effect of the commodity fall on the mining industry.
“Falling iron ore prices and the dwindling pipeline of projects are well documented,” he said.
“They are impacting miners in terms of profitability and market capitalisation, and these impacts are, not surprisingly, also being felt by those in the mining services sector.”
The top 10 participants on the index, which make up 84% of the combined index market capitalisation, experienced mixed fortunes.
While five of the top 10 improved their market capitalisation, the decline outweighed improvement to the tune of $1.2 billion over the quarter.
Index-topping Leighton Holdings experienced a value increase of 14%, or $1.08 billion, to be the biggest improver among the top 10 with a market capitalisation of $7.6 billion.
Number three-ranked WorleyParsons fell 51.8%, or $1.3 billion, to a market capitalisation of $2.5 billion, while number 10 Cardno declined 75.6%, or $423 million, to $560 million.
The report highlighted the negative movement of iron ore and coal prices, which fell 12% and 4% respectively, as major factors in the sector’s poor quarter.
It also identified uncertain growth prospects in major sales areas such as China, India and Japan as driving confidence down, but said the weakening Australian dollar should be of benefit to the industry.
Harwood said while the situation looked dire, there could be some upside to the downturn.
“If there is an upside, sustainable cost reduction initiatives, diversifying business activities, increasing cash management and debt reduction, and expanding capability through organic initiatives, acquisitions and alliances are driving change,” he said.
“Continued pressure on the sector can be expected to lead an increased number of transactions and some opportunistic merger and takeover offers.”
Deloitte partner Stephen Smith, who provided macroeconomic analysis for the index, said companies needed to do more than cut costs to get through the tough times.
“Our mining services sector is dealing with increasing uncertainty around new projects, with access to capital proving difficult, and explorers experiencing delays to expectations for the timing of approvals,” he said.
“Much of the industry has implemented cost reduction initiatives, but more needs to be done to accelerate sustainable change through this phase of the resources cycle.”
Deloitte’s mining services index had a total market capitalisation value of $31.9 billion at the end of the December quarter.
