One of the curious facets of mining services companies is that they rely entirely on future work to safeguard their existence.
A significant portion of every year must be spent winning enough contracts to ensure that everybody can return to work the following year.
This is fine during the boom times when China couldn't get enough of our resources.
But with global commodity markets slowing down, times are changing.
Let me call your attention to our iron ore companies.
With the conspicuous exception of Rio Tinto Limited (ASX: RIO) and BHP Billiton Limited (ASX: BHP), Australia's iron ore miners are treading water.
They've slashed capital expenditure, reduced exploration, and trimmed costs where possible.
With iron ore still reaching new 5-year lows, time will tell if that proves to be enough.
One thing they're NOT doing is spending money on construction, simply because there isn't any money to go around. Contracts are being negotiated on more favourable terms.
Executives are starting to notice that they can demand better terms from services companies, because it is a buyer's market.
This is bad if you're invested in the big players like Monadelphous Group Limited (ASX: MND) or Worleyparsons Limited (ASX: WOR), but it's absolutely tragic if you own shares in smaller companies like Ausdrill Limited (ASX: ASL), which continues to plunge.
Now take a look at the oil industry.
Companies are cutting exploration, slashing costs, and hoping prices turn around.
Things aren't as dire in the copper industry, but with prices down 22% in the past year you can bet that belts are being tightened and new projects are being reconsidered.
Gold remains a solitary bright spot, although producers have experienced their own price crash in recent years and they definitely aren't being flamboyant with their spending.
In fact with the US recovering and low global interest rates, many commentators are predicting that gold could be headed down in a big way too.
Consider all this bearishness in the outlook for mining commodities.
Now consider Australia's most recent Bureau of Resources and Energy Economics (BREE) report, which I called 'the final nail' in the coffin of the mining services industry.
In the six months to October last year, only three projects worth $597 million received a Final Investment Decision and progressed to the Committed Stage – the lowest number and value in more than a decade.
Earlier in the planning process, there were 19 fewer projects at the Public Announcement stage, and 8 less at the Feasibility Stage than in the April version of the report.
To put that in perspective, Monadelphous Group last year completed projects worth $2.3 billion (earning $146 million in profit).
Only one quarter of that amount of work received final investment approval in Australia in the six months to October 2014.
With a poor commodity market, there's unlikely to be much in the way of new projects coming through in the near future either.
Sure, Monadelphous and WorleyParsons have limited exposure to the oil industry, and as bigger players they're better positioned to bid for work.
There are also overseas projects, which aren't included in the BREE report.
It's also true that at some point the mining services industry will hit the bottom, at which point there are likely to be a few bargains floating around.
I don't know about you, but I don't think it's here yet.
