Transnet Freight Rail News Briefs Page 1 of 9

COMMODITY NEWSBRIEFS: 15 OCTOBER 2014 Please note that these articles are available in electronic format and can be requested and delivered via e-Mail.

(http://intra.spoornet.co.za) Natasha.Havenga@transnet.net

DISCLAIMER

The information contained in this publication is for general information purposes only. The information is provided by Transnet Freight Rail, a division of Transnet Limited, and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the publication, or the information, products, services, or related graphics contained in the publication for any purpose. Any reliance you place on such information is therefore strictly at your own risk. In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of profits arising out of, or in connection with, the use of this publication. This publication may refer to other publications which are not under the control of Transnet Freight Rail. We have no control over the nature, content and availability of those other publications. The inclusion of any other publications or other website links does not imply a recommendation or endorse the views expressed within them. Every effort is made to keep the content of the publication correct and complete. However, Transnet Freight Rail takes no responsibility for, and will not be liable for information in the publication being incorrect or incomplete. Transnet Freight Rail also does not guarantee the availability of the publication at any specific intervals

AUTOMOTIVE CAR MAKERS MUST AVOID ANTIPODEAN OBLIVION (Business Day, 15/10/2014) SA’s motor industry must avoid following its Australian counterpart into oblivion, or risk losing not only tens of thousands of jobs but also scarce manufacturing skills, an Australian government adviser said yesterday. Professor Göran Roos told an automotive conference in Midrand that the impending collapse of the Australian motor industry held important lessons for SA — not least that the effects would be felt far beyond the industry. For every direct automotive job lost in Australia, many more would be shed in service industries, and thousands of small businesses would face collapse. Australia’s three remaining light-vehicle manufacturers — Ford, General Motors and Toyota — will all disinvest in the next three years, bringing to an end more than 75 years of vehicle production in that country. Some truck assembly will continue, but from 2018 Australia will import all its cars and bakkies. From a peak of more than 400,000 in 2004, Australia will be lucky to build 200,000 vehicles this year. Reasons include the dismantling of import tariffs, from a peak of more than 50% in 1984 to 5% today, and a series of free-trade agreements with Asian countries allowing low-cost vehicles free access to the Australian market. But the biggest nail in the coffin, said Prof Roos, was the dramatic strengthening of the Australian dollar as a result of spiralling Chinese demand for Australian raw materials. From having a relatively low-cost manufacturing base before 2008, Australia today had the world’s most expensive. The motor industry, he said, was Australia’s “only remaining large-scale, complex, complete manufacturing ecosystem” able to design, develop and produce its own goods. As such, it had deep links to the rest of the economy. So while the three vehicle makers and their components suppliers directly employed 55,000 people, they helped support 260,000 people across more than 20,000 support and service companies. The industry in SA does not have the same depth but it is the country’s biggest manufacturing segment by far, contributing nearly 7% to gross domestic product, and acts as a major source of technology and skills transfer from overseas. SA’s automotive manufacturing and its related industries employ about 90,000 people. There are no official estimates of support-sector employment. The motor industry in SA faces similar challenges to Australia’s. It is a low-volume producer by international standards, with lagging productivity rates, and so struggles to be cost-competitive. Prof Justin Barnes, chairman of Benchmarking and Manufacturing Analysts SA, said yesterday that having once been on the fringe of the world’s top 10 vehicle manufacturing countries, SA was now outside the top 20. COEGA DEVELOPS AUTO MANUFACTURING ZONE (News24, 15/10/2014) The Coega Development Corporation (CDC), operator of the Coega Industrial Development Zone (IDZ), announced on Tuesday it will establish a multi original equipment manufacturers (OEM) complex for the automotive assembly and

Transnet Freight Rail News Briefs Page 2 of 9

components manufacturing sectors in zone 2 of its industrial estate in Nelson Mandela Bay, Port Elizabeth. The state-owned entity has earmarked 306 hectares of land for automotive manufacturing industrial activity through its recently unveiled five year strategic plan, which will embrace an OEM industrial clustering approach. The multi-OEM complex will house vehicle assembly halls and shared service infrastructures. First, second, and third tier automotive component suppliers will all be brought together in one mega-automotive zone. The Coega multi-OEM complex differs from other IDZ’s OEM platforms in South Africa, which comprises a central assembly hall for several vehicle brands. The CDC believes its OEM complex has the potential to become “the second economic heartbeat of Africa’s automotive manufacturing capital Port Elizabeth, which is also home to General Motors, Volkswagen and Ford manufacturing plants”. FAST MOVING CONSUMER GOODS SABMILLER BEER SALE TREND WORSENS IN Q2 (Engineering News, 15/10/2014) Poor summer weather in China hit SABMiller's lager sales in the second quarter, though higher prices and a jump in soft drink sales helped boost revenues at the world's second biggest beer maker. The brewer of lagers such as Peroni and Miller Lite has been trying to offset sluggish growth in developed markets with cost cuts, marketing drives and acquisitions, while also putting more emphasis on soft drink sales in emerging markets. Its strategy is the subject of great interest after an approach to buy Dutch rival Heineken was rebuffed last month, breathing life into long-running speculation SAB could soon be a target for the biggest brewer Anheuser Busch InBev. SAB said overall revenues rose 3% in the three months to the end of September, though the volume of beer sold fell 3%, a reversal for its core, high-margin business after a 1% increase in the first quarter. Including soft drinks, such as the ones SAB sells for Coca-Cola, total drinks volume was down 1% in the second quarter, with a 9% rise in soft drinks partly offsetting the decline in beer sales. Soft drinks account for 20% of SABMiller's sales volumes, but are far less profitable than beer. In the Asia Pacific region, overall drinks volume fell 8% in the second quarter. Beer volume in China "declined markedly" during July and August because poor weather in most of the central provinces meant people drank less lager. Total drinks volume in the second quarter also declined 2% in North America and 1% in Europe. It rose 5% in Latin America and 4% in Africa. RBC analyst Edwardes Jones said there was "no sign here of the gradually improving trend we expect for the sector as a whole over the second half of 2014". INDUSTRIAL TRADE CONDITIONS REMAIN TIGHT, WARNS SACCI (Engineering News, 15/10/2014) Uninspiring economic growth, difficulties in recovering from labour disruptions, the financial pressures facing households and below-par export volumes were contributing to restrained trade conditions, with the South African Chamber of Commerce and Industry’s (Sacci’s) seasonally adjusted Trade Activity Index (TAI) for September remaining in negative territory at 48 points. Although the TAI had improved from the 44 points recorded in August, it was below the 50-point level a year before, with the tight trade conditions struggling to move above the 50-point level. Sacci noted that the sales volumes and new orders sub indices had rebounded with both recovering to 47 points in September; however, both indices remained in negative territory. Supplies and backlogs on orders also improved, but the inventories index declined by three points to 50. “The tight trade conditions continued to contain price pressures with the sales price index at 55 and the input price index at 68 in September. Although both price indices increased in September, the levels were below the average of 62 for sales prices and 73 for input prices in the first nine months of 2014,” the chamber pointed out. Further, Sacci said respondents to its trade survey had remained positive about trade conditions for the coming six months and the seasonally adjusted expectations index recorded a level of 62. Expectations for both sales and input prices correspondingly remained virtually unchanged at 60 and 70. IRON STATE MOVES IN ON COAL AND IRON (The Times, 15/10/2014) Mineral Resources Minister Ngoako Ramatlhodi said he was considering declaring minerals such as coal and iron ore as “strategic” for the country. “We haven’t classified any, but it is provided for under the mineral bill, which is before the president. “If that bill is signed into law, then it will give the minister the ability to declare certain minerals strategic for purposes of industrialisation in South Africa,” Ramatlhodi said. Under the bill, such minerals “will be sold for production costs excluding transportation. That is the mine-gate price. And the industry is comfortable with that, because they negotiated that

Transnet Freight Rail News Briefs Page 3 of 9

formula,” the minister said. He would not comment be drawn categorically on what he will declare strategic, but said, “Iron ore is obvious and coal, because coal it fires our power stations. “There is coal for export and coal of a lesser quality, which stays in the country. That we would want to keep for our power stations.” Companies that could be affected include Kumba Iron Ore, which is a unit of Anglo American, and mining companies firms Exxaro and BHP Billiton. Ramatlhodi dismissed reports that a forthcoming meeting between Russian and South African officials would lay the groundwork for an Opec-style platinum cartel between the countries, which account for about 80% of global production of the precious metal. He said he would rather see the industry and private sector find ways to support the platinum price, which recently hit five-year lows and is a major export earner, the minister said. COAL COAL FUTURES DROP BELOW $72 FOR FIRST TIME SINCE MARCH 2009 (Mining Weekly, 15/10/2014) European thermal coal futures dropped below $72/t for the first time since March 2009, on weakening demand from the region's biggest economy, Germany, and rising output from miners worldwide. API2 2015 coal futures dropped to $71.90/t on Tuesday afternoon, their lowest since the height of the financial crisis in March 2009 and close to levels last seen in 2007, before the boom and bust period of 2008/09. Prices have also almost halved since they last peaked in 2011, when the nuclear meltdown at Japan's Fukushima reactor, unrest in gas-producing North Africa and floods in coal-mining Australia last pushed up global energy prices. Traders said the fall in coal prices came on the back of weakening crude oil, which dropped to post-2010 lows of below $86.50/bbl, after the International Energy Agency cut its estimates for oil demand this year and next. See article “STATE MOVES IN ON COAL AND IRON” under heading IRON MINERAL MINING END OF SUPER COMMODITY CYCLE COULD BRUISE SA (News24, 15/10/2014) "The super commodity cycle is behind us as producers again care more about cost containment than expansion," according to economist Mike Schüssler. In a report he wrote for TreasuryOne Schüssler explained that South African commodity prices are the lowest in over four years. Using South Africa’s four main export commodities of platinum, gold, iron ore and coal it is clear that the current drop in the prices of these commodities is actually massive as the overall index dropped by 10.5% over the last three months. The last few days saw further sharp declines in gold and platinum as investors exit precious commodities to re-enter American assets as they feel that rising interest rates will increase the cost of holding gold and platinum. Coal is feeling the effect from the oversupply of energy products and iron ore is feeling the slower Chinese economy plus an oversupply. Already the world’s two largest producers are talking of bringing down production costs, from about $27 to about $20 a tonne for BHP and for Rio Tinto - from about $21 to under $20 a tonne. "Over the last 15 odd years many commodity prices rose substantially and that brought more production from commodity producers and also cost containment measures by users," said Schüssler. According to Schüssler, while it is difficult to forecast any cycle with 100% confidence there are now the first big signs that the commodity cycle will slip into a longer term soft mode. "It is a known fact that higher American interest rates are normally bad for commodity prices, as the cost of holding them for investors apart from storage increases," said Schüssler. "With five years of negative real interest rates behind us the CRB commodity price index is already taking a pounding. So any move up in American interest rates will probably be a big nail in the super cycle coffin." In Schüssler's view it may take three or four years for positive real interest rates, at which point holding gold and other precious metals will no longer make sense. "But en-route to positive real interest rates one can expect more declines in commodity prices than increases," he said. The next big factor Schüssler pointed out is that the demand for many commodities is growing less than supply is growing, particularly metal commodities. "The higher prices have helped the recycling industry again get its groove back. The world has many people who look for scrap metal, platinum from older cars, bottles and plastic. In some cases, like glass, the world already has too much with the recycling," said Schüssler. As a third reason for Schüssler thinking the commodity cycle is on the decline, is the forecast that China itself is becoming more services orientated. "The investment led growth in China is slowing and becoming more of a service led growth. And the Chinese government is trying to slow growth too. It is not great if the number one commodity importer slows and undergoes a structural change to services at the same time," he said. Most forecasters from the Royal Bank of Canada to Goldman Sachs are all indicating lower commodity prices in general. "This gives one the rather sad combination of falling demand,

Transnet Freight Rail News Briefs Page 4 of 9

increasing supply and a monetary headwind, given that most commodities are priced in US dollars. This is the complete inverse of the super cycle conditions that have prevailed through most of the last fifteen years," he said. NON-FERROUS METALS GLOBAL COPPER MARKET TO SWING TO SURPLUS IN 2015 FOR FIRST TIME IN 5YRS (Mining Weekly, 15/10/2014) A global copper industry think tank on Tuesday said that the copper market, which had been in a supply deficit for the past five years, would swing to a surplus. The International Copper Study Group (ICSG) met in Lisbon, Portugal on Monday and Tuesday, after which it published its copper market forcast for 2014-2015. The group said hat global refined copper output was expected to top demand for refined copper by about 390 000 t, as demand was expected to lag behind production growth. The ICSG expected global refined copper demand for 2014 to exceed refined copper production by about 270 000t. After a growth of 8% in 2013, world mine output was expected to grow by around 3% in 2014 to 18.6-million tonnes, compared with that in 2013. Operational failures combined with delays in ramp-up production and start-up of new mines was leading to lower-than-expected growth. However, strong growth in world mine output was expected in 2015, owing to more output from expansions and new mine projects. After adjusting by historical disruption factors, world mine output was expected to grow by about 7% in 2015. Most of the new production was expected to be in the form of copper in concentrate. This year, world refined copper output was expected to rise by about 5% to 22.1-million tonnes, compared with that in 2013, mainly underpinned by expanded capacity at electrolytic plants in China (and to a lesser extent from expanded solvent extraction and electro-winning (SX-EW) capacity in Africa. In 2015, world refined copper was expected to grow further by about 4% to 23.1-million tonnes. The ICSG expected the global growth in demand for refined copper to rise this year by about 5% year-on-year to 22.4-million tonnes, partially supported by the tightness in the scrap market. Apparent demand in China was expected to increase by about 7% in 2014. CURRENCIES AND PRICES

ALSI: 3 month to 14 Oct 14

Transnet Freight Rail News Briefs Page 5 of 9

(Mail & Guardian, 15/10/2014)

JSE AS AT 17:00PM 14 OCTOBER 2014

All Share Index 14/10 47,687

+ 318.51 + 0.67%

Industrials Index 14/10 44,538

+ 113.77 + 0.26%

Financials Index 14/10 36,361

+ 233.45 + 0.65%

Top 40 Index 14/10 42,501

+ 319.80 + 0.76%

Industrial 25 Index 14/10 56,382

+ 250.68 + 0.45%

Financial 15 Index 14/10 13,857

+ 116.79 + 0.85%

Resources 10 Index 14/10 50,226

+ 673.10 + 1.36%

Alt-X Index 14/10 1,289

+ 0.25 + 0.02%

WORLD INDICATORS

FOREX

Rand/Dollar 06:21 11.0711

+ 0.04 + 0.37%

Rand/Pound

06:25 17.5705

- 0.13 - 0.75%

Rand/Euro 06:25 13.9912

- 0.07 - 0.47%

COMMODITIES

Gold (usd/oz) 06:24 1,227.25

- 10.85 - 0.88%

Platinum (usd/oz)

06:24 1,256.75

- 11.25 - 0.89%

Brent (usd/barrel) 06:21 85.45

- 3.44 - 3.87%

WORLD MARKETS

Wall St (DJIA) 14/10 16,315

- 5.88 - 0.04%

Germany (DAX)

14/10 8,825

+ 36.40 + 0.41%

Japan (Nikkei) 06:24 15,019

- 282.00 - 1.84%

(Business Report, 15/10/2014) COPPER A – SETTLEMENT PRICE – 6780, 5 FORWARD RATES - Dollar/rand 4pm close: R11, 0632

Transnet Freight Rail News Briefs Page 6 of 9

Transnet Freight Rail News Briefs Page 7 of 9

Petrol/ Diesel Price

YR2014

01-Jan-

14

05-Feb-

14

05-Mar-

14

02-Apr-

14

07-May-

14

04-Jun-

14

02-Jul-

14

06-Aug-

14

03-Sep-

14

01-Oct-

14

05-Nov-

14

03-Dec-

14

COASTAL

95 LRP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00

95 ULP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00

Diesel 0.05% (c/l) 1260.55 1284.75 1311.95 1299.15 1269.37 1245.79 1259.79 1254.17 1228.79 1215.79

Diesel 0.005% (c/l) 1263.95 1288.15 1316.35 1304.55 1274.77 1249.19 1263.19 1258.57 1234.19 1221.19

Illuminating Paraffin (c/l) 963.828 975.828 991.828 953.028 934.028 924.028 947.028 940.028 921.028 907.028

Liquefied Petroleum Gas

(c/kg) 2260.00 2314.00 2372.00 2350.00 2346.00 2319.00 2377.00 2365.00 2257.00 2269.00

GAUTENG

93 LRP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00

93 ULP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00

95 ULP (c/l) 1357.00 1396.00 1432.00 1439.00 1424.00 1402.00 1433.00 1433.00 1366.00 1361.00

Diesel 0.05% (c/l) 1287.15 1311.35 1338.55 1329.75 1299.97 1276.39 1290.39 1284.77 1259.39 1246.39

Diesel 0.005% (c/l) 1290.55 1314.75 1342.95 1335.15 1305.37 1279.79 1293.79 1289.17 1264.79 1251.79

Illuminating Paraffin (c/l) 1009.728 1021.728 1037.728 1003.228 984.228 974.228 997.228 990.228 971.228 957.228

Liquefied Petroleum Gas

(c/kg) 2442.00 2496.00 2554.00 2532.00 2528.00 2501.00 2559.00 2547.00 2439.00 2451.00

YR2013

02-Jan-

13

06-Feb-

13

06-Mar-

13

03-Apr-

13

01-May-

13

05-Jun-

13

03-Jul-

13

07-Aug-

13

04-Sep-

13

02-Oct-

13

06-Nov-

13

04-Dec-

13

COASTAL

95 LRP (c/l) 1151.00 1192.00 1273.00 1283.00 1210.00 1202.00 1286.00 1318.00 1313.00 1293.00 1265.00 1282.00

95 ULP (c/l) 1151.00 1192.00 1273.00 1283.00 1210.00 1202.00 1286.00 1318.00 1313.00 1293.00 1265.00 1282.00

Diesel 0.05% (c/l) 1086.67 1104.47 1162.85 1170.01 1114.45 1110.47 1188.67 1221.63 1235.45 1233.45 1218.25 1228.37

Diesel 0.005% (c/l) 1091.07 1108.87 1167.25 1175.41 1118.85 1114.87 1193.07 1226.03 1240.85 1238.85 1221.65 1231.77

Illuminating Paraffin (c/l) 807.128 833.128 890.128 860.328 802.328 803.328 878.328 903.328 928.328 924.328 908.328 924.828

Liquefied Petroleum Gas

(c/kg) 2047.00 2120.00 2238.00 2183.00 2102.00 2107.00 2236.00 2258.00 2267.00 2227.00 2186.00 2204.00

GAUTENG

93 LRP (c/l) 1165.00 1206.00 1287.00 1297.00 1224.00 1216.00 1300.00 1332.00 1327.00 1308.00 1280.00 1297.00

93 ULP (c/l) 1165.00 1206.00 1287.00 1297.00 1224.00 1216.00 1300.00 1332.00 1327.00 1308.00 1280.00 1297.00

95 ULP (c/l) 1186.00 1227.00 1308.00 1320.00 1247.00 1239.00 1323.00 1355.00 1350.00 1330.00 1302.00 1319.00

Diesel 0.05% (c/l) 1111.37 1129.17 1187.55 1196.61 1141.05 1137.07 1215.27 1248.23 1262.05 1260.05 1244.85 1254.97

Diesel 0.005% (c/l) 1115.77 1133.57 1191.95 1202.01 1145.45 1141.47 1219.67 1252.63 1267.45 1265.45 1248.25 1258.37

Transnet Freight Rail News Briefs Page 8 of 9

Illuminating Paraffin (c/l) 849.028 875.028 932.028 906.228 848.228 849.228 924.228 949.228 974.228 970.228 954.228 970.728

Liquefied Petroleum Gas

(c/kg) 2229.00 2302.00 2420.00 2365.00 2284.00 2289.00 2418.00 2440.00 2449.00 2409.00 2368.00 2386.00

(SAPIA online)

Daily prices for 14 October 2014

LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 2070.00 1908.50 6780.00 2053.00 16175.00 20150.00 2323.00 2140.00

Cash Seller & Settlement 2080.00 1909.00 6780.50 2053.50 16180.00 20155.00 2323.50 2145.00

3-months Buyer 2085.00 1937.50 6728.00 2064.00 16270.00 20215.00 2327.50 2179.00

3-months Seller 2095.00 1938.00 6729.00 2065.00 16290.00 20220.00 2328.00 2181.00

Dec 1 Buyer 2085.00 1972.00 6660.00 2088.00 16375.00 2350.00 2210.00

Dec 1 Seller 2095.00 1977.00 6670.00 2093.00 16475.00 2355.00 2220.00

15-months Buyer 20285.00

15-months Seller 20335.00

Dec 2 Buyer 2008.00 6605.00 2112.00 16225.00 2333.00

Dec 2 Seller 2013.00 6615.00 2117.00 16325.00 2338.00

Dec 3 Buyer 2045.00 6550.00 2122.00 15975.00 2308.00

Dec 3 Seller 2050.00 6560.00 2127.00 16075.00 2313.00

(London Metal Exchange, 15/10/2014)

NOTE: Your attention is drawn to the following: 1. USE

This Newsbrief is intended for the use of Transnet employees only. It is not to be disclosed or disseminated to outside parties, without the consent of a Transnet Freight Rail Manager who is authorised to communicate with external parties. The following specific terms apply: (a) Transnet Freight Rail hereby grants permission to its employees to view the Newsbrief, and copy, print and

use any of its contents, subject to the following conditions:

(b) The Newsbrief shall be used solely for information and/or commercial purposes within Transnet only, and shall not be disseminated to any external party, copied or posted on any external network computer or broadcast in any media. Any other use, including the reproduction, modification, distribution, transmission, re-publication, display or performance in any form, of the content of the Newsbrief without written permission from Transnet, is strictly prohibited.

(c) Sale or public distribution or copying for sale or public distribution of any material in the Newsbrief is strictly prohibited.

(d) No modifications to the Newsbrief shall be made.

(e) Use for any other purpose is expressly prohibited by Transnet and may result in disciplinary action against

Transnet Freight Rail News Briefs Page 9 of 9

any transgressors, and civil and criminal action may also be taken. Violators will be prosecuted to the maximum extent possible.

2. COPYRIGHT, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY RIGHTS

Copyright in the Newsbrief vests in Transnet.

(a) All content included in the Newsletter, such as text, graphics, logos, button icons, images, audio clips, software and information, is the property of Transnet or its content suppliers and protected by South African and international copyright law and all other intellectual property laws.

(b) The compilation (meaning the collection, arrangement and assembly) of all content in the Newsletter is the exclusive property of Transnet Freight Rail and protected by South African and international copyright law and all other intellectual property laws.

(c) The Transnet Freight Rail name and logo are registered trademarks of the company, protected by South African and international trademark laws and all other intellectual property laws.

(d) Note that any product, processes or service referred to in the Newsletter may be subject to other copyright, patent, trade mark or other intellectual property laws and may incorporate proprietary notices and copyright information relating to that product, process or service.