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COMMODITY NEWSBRIEFS: 13 AUGUST 2015 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

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AUTOMOTIVE FORD ASSEMBLY ENTERS NIGERIA (Business Report, 13/8/2015) The decision by the Ford Motor Company to establish a semi-knocked down (SKD) assembly operation in Nigeria is the first step in a wider plan by the motor manufacturer to grow its manufacturing presence in that country. Ford has entered into a partnership with the Ford dealer group, Coscharis Motors, on a project to assemble the Ranger on a SKD basis using vehicle kits supplied from South Africa. Jeff Nemeth, the president and chief executive of the Ford Motor Company for the sub-Saharan Africa region, declined this week to go into detail on the investment that would be made in the assembly plant but the company was hoping to grow the business. He said the investment “was going to come over time” because the Nigerian automotive policy stated that you started with simple SKD, migrated to more complex SKD and then to completely knocked down manufacturing. Nemeth said the Nigerian facility was not a threat or risk to Ford’s manufacturing operations in South Africa because its plant in Silverton was operating at full capacity. The Nigerian facility would have the capacity to assemble 5 000 units a year. The Ranger accounted for about 50 percent to 60 percent of Ford’s mix in Nigeria, which meant it would double its Ranger business if it shipped all 5 000 Ranger kits from South Africa to Nigeria. INTERMODAL SHIPPING LINES IN THE DRIVING SEAT AS PORTS LOSE POWER (FTW, 14/8/2015) Ports in southern Africa need to collaborate if they are to stand a chance against the alliances being formed by shipping lines and the changes this brings to container traffic. According to Aruna Bunwaree Ramsaha, deputy director general for the Mauritius Ports Authority, global demand for containers is continuing to increase – in Africa as well – but shipping lines are the controlling role-players. “Ports in former times were more powerful than shipping lines or ship operators as they were terminal points. Nowadays we are nodal points, simply one link in a chain and the shipping lines are far more powerful than ports – particularly in the container transport industry,” she said. “If a port cannot deliver what the line wants, it simply leaves and takes the traffic with it.” She said the demands were clear – faster turnaround times, infrastructure to allow for bigger vessels, better equipment and improved service delivery.

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STEEL TRADE UNIONS THREATEN STRIKE ACTION OVER LOOMING STEEL JOB CUTS (Engineering News, 13/8/2015) Trade unions, the National Union of Metalworkers of South Africa, Solidarity and Uasa on Wednesday threatened to start mass pickets and demonstrations to defend jobs and highlight “the brutal plight” faced by workers in South Africa’s industry. This followed a bilateral meeting with steel industry CEOs and employer bodies, led by Numsa general secretary Irvin Jim in Johannesburg on Tuesday, where the “looming jobs loss bloodbath in this strategic sector of our economy” was discussed. The unions said those present at the meeting agreed that the pending job losses would have a “devastating impact” on local communities, as close to 75% of working class and poor households in the Vaal and Newcastle areas depended on the steel industry for their survival and livelihoods. The unions noted that the looming job losses in the steel industry were going to be far greater than that of the mining industry. STEEL PROTECTION CANNOT LEAD TO PRICE HIKES, GOVT WARNS (Engineering News, 13/8/2015) Department of Trade and Industry (DTI) director-general Lionel October has confirmed that various processes are at an advanced stage to offer greater protection to the domestic primary steel industry, as well as to specify the use of locally produced steel in public infrastructure projects. He stresses, though, that government will not act in a way that undermines the integrity of independent processes, highlighting that it is up to International Trade Administration Commission of South Africa (Itac) to assess the case for raising duties to the 10% bound levels allowed for under South Africa’s World Trade Organisation (WTO) commitments. However, he says that Itac has dedicated significant resources to investigating the various submissions and that findings on the first two steel-related applications currently before it could well be handed to Trade and Industry Minister Dr Rob Davies within the coming days. Davies told a recent meeting of the Presidential Business Working Group that government would back greater protection for the industry, which was facing intense import competition as a result of the current global steel glut. However, he also said government would insist that such protection should not form the basis for an immediate 10% rise in domestic steel prices. Instead the protection should create room for the local industry to win back market share from imports. ArcelorMittal South Africa (AMSA), which has submitted a total of 11 tariff applications to Itac, has argued vociferously for increased protection on the basis that it was unable to compete with cheap, “subsidised” steel imports from China. It estimates that imports supplied up to 30% of domestic consumption during the first half of 2015. The DTI believes protection is currently “justifiable” in light of the pressures being faced by the domestic steel industry. The country’s second-largest producer Evraz Highveld Steel and Vanadium is in business rescue, while Scaw has issued a notice of possible retrenchments. Likewise, AMSA has indicated that it could mothball its Vereeniging Works, which could result in job losses. “The steel industry is basically the core of your manufacturing economy and we cannot afford to lose it. We must have a steel industry in this country – it’s non-negotiable. So we must now protect the industry,” October avers. Government is also of the view that, in light of the oversupply situation, the industry has little scope to abuse its pricing power, as it has done in the past. “There is, therefore, very little possibility of monopoly pricing at the moment and we think the tariff will assist.” However, it will still be monitoring pricing and will move to withdraw protection should there be any indication of abuse. COAL COAL STRIKE LOOMS AS NUM SPURNS WAGE OFFER (News24, 13/8/2015) Tension within the mining industry was ratcheted up on Wednesday when the National Union of Mineworkers (NUM) rejected as “insulting” the latest wage offer for the coal sector. The union also complained that the Chamber of Mines is “negotiating in bad faith” by allegedly trying to “sneak in” a three-year deal instead of the agreed two-year agreement. The chamber has offered between 5% and 6.5% to miners whose basic wage at the lowest level is little more than R5 000. “We are not talking percentages,” said NUM chief negotiator Peter Bailey. “We want a R3 000 increase across the board which would bring the lowest paid workers up to R8 000 a month.” What the union demand would also do is to close the wage gap that exists between various grades working in the coalfields. However, with the recent slide in commodity prices - including coal - and problems with supplies to and prices from Eskom, the producers claim they cannot afford more than their “final offer”. As a result, the unions have not ruled out the possibility of strike action.

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SLIDING CHINESE YUAN SENDS COAL TO NEAR DECADE LOWS (Mining Weekly, 13/8/2015) Coal futures fell to their lowest level in almost a decade this week as China's devaluation of its currency triggered economic concerns over the economy of the world's biggest coal consumer. Benchmark European API2 2016 coal futures last settled at $54.35 per tonne, their lowest level since November 2005 and down almost two-thirds since their last peak in 2011, and benchmark Chinese coal futures, launched in 2013, were also near record lows, last settling at $51.10/t. The price falls came as China's yuan hit four-year lows, slipping further a day after authorities devalued the yuan in a move that raised fears of a global currency war. Analysts said they expected China's government to intervene further this year in support of its economy. "Going forward, we believe the government will continue to ease policy to stabilize sluggish aggregate demand growth," Morgan Stanley said on Wednesday, adding it expected another interest rate cut towards the end of the third quarter 2015. China is the world's biggest importer of thermal coal, but its demand for overseas shipments has already been waning as its economy grows at its slowest pace in decades and the government tries to reign in on rampant pollution, to which coal contributes heavily. The country's coal imports over the first half of the year were down 37.5% over the same period last year to 99.9-million tonnes, although there has been a slight pick-up since July. With China's yuan now also falling, its importers are seeing their purchasing power of dollar-denominated products like coal or oil eroded, potentially hitting demand. The physical coal products underlying API derivatives were also weak, with prompt cargoes from South Africa's Richards Bay export terminal last settling at $55.20/t, close to 2015 lows. Cargoes from Australia's Newcastle terminal were 1.7% down from their August high at $61.20/t, and shipments into Europe's main terminals at Amsterdam, Rotterdam or Antwerp (ARA) were at $56.885/t, down 1.65% from their monthly high. TIMBER, PAPER, PUBLISHING MPACT DELIVERS DOUBLE-DIGIT H1 EARNINGS GROWTH (Engineering News, 13/8/2015) JSE-listed paper and packaging company Mpact on Wednesday reported a double-digit uptick in earnings for the first half of the year, but warned that the continued subdued economic environment could make the upward trend hard to sustain in the second half of the year. The company’s headline earnings a share surged 46.9% to 134.4c during the six months to June, while basic earnings a share expanded 47.4% to 135.3c on the back of an improved trading performance and a lower effective tax rate over the prior corresponding period. Mpact’s paper unit delivered operating profit of R315.4-million in the first half of the year, a 12.4% rise on the prior corresponding period owing to higher selling prices and a favourable product mix, which were partially offset by increased raw material costs. A favourable product mix and cost savings resulted in a 98.9% jump in the first-half operating profit of the company’s plastics business to R87.3-million, with the operating profit margin having increased to 7.6% from 4.1%. Group revenue increased 10.8% to R4.4-billion for the six months to June, mainly as a result of volume growth, a favourable sales mix and higher selling prices. The paper business generated revenue of R3.3-billion, up 12.1% on the prior period owing to organic sales volume growth of 2.4%, while the plastics business increased revenue by 7.3% to R1.1-billion on the back of good volume growth in all sectors, other than the FMCG unit, which declined following the restructuring last year. Despite the improved performance in the six months under review, the continued subdued economic conditions and the level of raw material, labour, electricity and administered services cost inflation, could “make it difficult” to maintain similar levels of volume growth in the second half, Strong pointed out. However, he said the company hoped to minimise the impact through several interventions, such as the establishment of a R350-million polyethylene terephthalate recycling (rPET) plant and the R765-million upgrade of its Felixton mill, in KwaZulu-Natal, in addition to other investments in the recycling and corrugated businesses, and continued productivity improvements and cost-saving initiatives across its operations. NON-FERROUS METALS NICKEL PLUNGES TO SIX-YEAR LOW (Business Report, 13/8/2015) Nickel plunged to the lowest since 2008 as most industrial metals fell after China took further steps to weaken the yuan. The metal, used in stainless steel, slumped 15 percent, the most since September 2011, before paring losses. Contracts for delivery in three months were down 2 percent to $10 545.00 a metric ton as of 11:56 am in London. Tin and lead dropped, while aluminum was little changed. Copper and zinc rose. “Metals have weak fundamentals and the market took great fright after the central bank unexpectedly cut the reference rate again,” said Fang Junfeng, an analyst at Shanghai Cifco Futures. China’s decision on Tuesday to devalue the yuan and shift to a more market-determined rate sparked concern that the world’s second-largest economy is faltering. While the government seeks to bolster the economy, commodities may end up

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worse off as imports of metals such as copper slow and exports of raw materials such as steel increase into oversupplied markets. Chinese fixed-asset investment grew at the slowest pace since December 2000 in July, while the rate of expansion for retail sales and industrial production also weakened, data on Wednesday showed. Tin slid 1.3 percent, the second-biggest decline among the main contracts on the London Metal Exchange. Zinc sank to the lowest in almost four years before recovering. Prices were up 0.2 percent to $1 810 a ton. Copper added 0.2 percent to $5 136.50 a ton. The Bloomberg index tracking industrial metals has plunged 19 percent in 2015. GENERAL GROWTH AT RISK WARNS MOODY’S (Business Report, 13/8/2015) The ongoing shenanigans in the mining sector, on top of energy constraints, had put further pressure on the South African economy, ratings agency Moody’s said yesterday in a credit opinion report. “The prospect of gridlock in the gold mining sector wage negotiations and controversies between the government and several mining companies that are planning lay-offs and mine closures on top of energy constraints add further downside risk to our growth figures,” said Moody’s. The Chamber of Mines, which negotiates on behalf of most of the major gold mining companies, indicated last night that the wage negotiations had reached a deadlock. Mineral Resources Minister Ngoako Ramatlhodi and mining companies are at loggerheads over planned mine closures and retrenchments as a result of weak economic growth. Ramatlhodi and the mining industry are also fighting over a key interpretation of an ownership clause in the mining charter concerning empowerment. The ratings agency, which has South Africa under a Baa2 rating with a stable outlook, said the rating reflected policymakers’ commitments to containing increases in government deficits and debt. “Government efforts to restrict current spending – including the wage bill – to protect its infrastructure expansion efforts are an important part of its broader efforts to enhance long-term prospects by eliminating infrastructure bottlenecks without significantly loosening fiscal policy.” It said the country could be downgraded if the official commitment to fiscal consolidation and debt stabilisation faltered, or if the investment climate deteriorated further, imperilling the availability of external financing for the current account deficit. Meanwhile, the rand again hit a 14-year low against the dollar yesterday, as a rout in commodity currencies continued after China devalued the yuan. The yuan has fallen almost 4 percent in two days since the central bank announced the devaluation on Tuesday. China’s move has piled pressure on the rand, which is already down 11 percent this year. The rand touched R12.8754 to the dollar yesterday, the weakest level for the local unit since December 2011, and was trading at R12.7633 at 6.30pm. RMB said the rand’s reaction to another move in the yuan had been sharp and risks remained high as the lack of clarity on what the Chinese authorities intended to do weighed on global markets. Azar Jammine, the chief economist at Econometrix, said his view was that the rand was unlikely to lose further ground over the short term. However, one had to be concerned about the possibility that the Chinese devaluation might be the first of many in that country, he added. CURRENCIES AND PRICES

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ALSI: 3 mnth to 12 Aug 15

(Mail & Guardian, 13/8/2015)

JSE AS AT 17:01PM 12 AUGUST 2015

All Share Index 12/08 50,571

- 1,650.57 - 3.16%

Industrials Index 12/08 43,590

- 1,183.59 - 2.64%

Financials Index 12/08 44,919

- 1,588.84 - 3.42%

Top 40 Index 12/08 44,980

- 1,642.23 - 3.52%

Industrial 25 Index 12/08 64,825

- 2,573.02 - 3.82%

Financial 15 Index 12/08 16,905

- 700.74 - 3.98%

Resources 10 Index 12/08 35,532

- 103.42 - 0.29%

Alt-X Index 12/08 1,447

+ 3.43 + 0.24%

WORLD INDICATORS

FOREX

Rand/Dollar 06:27 12.7253

- 0.05 - 0.38%

Rand/Pound

06:30 19.8456

- 0.04 - 0.21%

Rand/Euro 06:30 14.1781

+ 0.06 + 0.43%

COMMODITIES

Gold (usd/oz) 06:27 1,121.35

+ 11.65 + 1.05%

Platinum (usd/oz)

06:27 998.75

+ 17.25 + 1.76%

Brent (usd/barrel) 06:27 49.80

+ 0.62 + 1.26%

WORLD MARKETS

Wall St (DJIA) 12/08 17,403

- 0.33 - 0.002%

Germany (DAX)

12/08 10,925

- 680.17 - 5.86%

Japan (Nikkei) 06:27 20,522

- 199.16 - 0.96%

(Business Report, 13/8/2015)

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(TFR Commercial Management: Business Performance Dept)

Petrol/ Diesel Price

YR2015

07-Jan-

15

04-Feb-

15

04-Mar-

15

01-Apr-

15

06-May-

15

03-Jun-

15

01-Jul-

15

05-Aug-

15

02-Sep-

15

07-Oct-

15

04-Nov-

15

02-Dec-

15

COASTAL

95 LRP (c/l) 1083.00 990.00 1086.00 1246.00 1246.00 1293.00 1334.00 1283.00

95 ULP (c/l) 1083.00 990.00 1086.00 1246.00 1246.00 1293.00 1334.00 1283.00

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Diesel 0.05% (c/l) 997.49 895.49 969.49 1090.09 1085.09 1134.09 1138.09 1062.27

Diesel 0.005% (c/l) 1001.89 899.89 973.89 1096.49 1091.49 1137.49 1141.49 1067.67

Illuminating Paraffin (c/l) 697.728 595.728 668.728 690.828 685.828 727.828 733.828 663.828

Liquefied Petroleum Gas

(c/kg) 1829.00 1679.00 1833.00 1918.00 1935.00 2035.00 2091.00 2002.00

GAUTENG

93 LRP (c/l) 1102.00 1009.00 1105.00 1261.00 1261.00 1308.00 1352.00 1301.00

93 ULP (c/l) 1102.00 1009.00 1105.00 1261.00 1261.00 1308.00 1352.00 1301.00

95 ULP (c/l) 1124.00 1031.00 1127.00 1289.00 1289.00 1336.00 1377.00 1326.00

Diesel 0.05% (c/l) 1028.09 926.09 1000.09 1122.79 1117.79 1166.79 1170.79 1094.97

Diesel 0.005% (c/l) 1032.49 930.49 1004.49 1129.19 1124.19 1170.19 1174.19 1100.37

Illuminating Paraffin (c/l) 747.928 645.928 718.928 743.828 738.828 780.828 786.828 716.828

Liquefied Petroleum Gas

(c/kg) 2011.00 1861.00 2015.00 2100.00 2117.00 2217.00 2273.00 2184.00

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 1275.00 1206.00

95 ULP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00 1275.00 1206.00

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 1154.79 1101.49

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 1161.19 1106.89

Illuminating Paraffin (c/l) 963.828 975.828 991.828 953.028 934.028 924.028 947.028 940.028 921.028 907.028 855.028 805.728

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 2164.00 2039.00

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 1298.00 1229.00

93 ULP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00 1298.00 1229.00

95 ULP (c/l) 1357.00 1396.00 1432.00 1439.00 1424.00 1402.00 1433.00 1433.00 1366.00 1361.00 1316.00 1247.00

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 1185.39 1132.09

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 1191.79 1137.49

Illuminating Paraffin (c/l) 1009.728 1021.728 1037.728 1003.228 984.228 974.228 997.228 990.228 971.228 957.228 905.228 855.928

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 2346.00 2221.00

(SAPIA online)

Daily prices for 12 August 2015

LME Official Prices, US$ per tonne

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Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1705.00 1546.50 5102.50 1707.50 10455.00 15160.00 1808.50 1650.00

Cash Seller & Settlement 1715.00 1547.00 5103.00 1708.00 10460.00 15165.00 1809.00 1650.50

3-months Buyer 1705.00 1581.50 5118.00 1716.00 10515.00 15125.00 1814.00 1690.00

3-months Seller 1715.00 1582.00 5118.50 1716.50 10520.00 15130.00 1815.00 1692.00

15-months Buyer 15060.00

15-months Seller 15110.00

Dec 1 Buyer 1705.00 1645.00 5155.00 1752.00 10600.00 1848.00 1750.00

Dec 1 Seller 1715.00 1650.00 5165.00 1757.00 10700.00 1853.00 1760.00

Dec 2 Buyer 1700.00 5185.00 1775.00 10685.00 1865.00

Dec 2 Seller 1705.00 5195.00 1780.00 10785.00 1870.00

Dec 3 Buyer 1757.00 5220.00 1792.00 10705.00 1870.00

Dec 3 Seller 1762.00 5230.00 1797.00 10805.00 1875.00

(London Metal Exchange, 13/8/2015)

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