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COMMODITY NEWSBRIEFS: 18 APRIL 2016

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Natasha.Havenga@transnet.net

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AUTOMOTIVE SA CAR, BAKKIE EXPORTS INTO AFRICA CONTINUE TO SLIDE (Engineering News, 18/4/2016) South African car and bakkie exports into Africa declined for the third year in a row in 2015, falling from 79 228 units in 2012, to 77 589 units in 2013, 60 189 units in 2014, and 41 446 units last year – this according to the Automotive Industry Export Council’s newest Automotive Export Manual, compiled by Dr Norman Lamprecht. Lamprecht is also executive manager at the National Association of Automobile Manufacturers of South Africa. Truck and bus exports into Africa also declined, from 1 404 units in 2014, to 1 116 units in 2015. MAN was the top truck exporter from South Africa. When considering rand-value and including components, however, total automotive exports from South Africa increased from R31.6-billion in 2014, to R34-billion in 2015. Big ticket component exports into Africa in 2015 were automotive tooling, engine parts, engines, gauges, transmission shafts and tyres. Lamprecht notes in the export manual that vehicle exports to some of the country’s top destinations in Africa, namely Nigeria and Algeria, reflected “a substantial decline” owing to new vehicle import regulatory changes implemented in 2014. The economic downturn seen in many African countries, relating to falling oil and commodity prices, also had a widespread negative effect on vehicle exports. An assessment of individual country data supports this fact. South Africa’s number one African export destination in 2015 was Namibia, at R9.4-billion, followed by Botswana, at R4.9-billion, and Mozambique, at R2.6-billion. Lamprecht believes that the expansion of free trade agreements among African countries, as is currently under discussion, would benefit South Africa’s automotive industry greatly. South Africa produced 64% of the vehicles assembled in Africa in 2015. Total global automotive exports from South Africa increased by R35.8 billion – or 30.9% – to R151.5-billion, in 2015, up from the R115.7-billion recorded in 2014. The UK with 101 704 vehicles, followed by the US, Australia and Japan, were South Africa’s top destinations for car and bakkie exports in 2015. European Union members received 173 796 vehicles. AUTOMOTIVE INDUSTRY REVS UP TO RECORD R5.3BN TRADE SURPLUS (Business Report, 18/4/2016) The automotive industry’s trade balance under the Automotive Production and Development Programme (APDP) was positive for the first time last year, with the industry recording a R5.3 billion trade surplus. This follows the industry’s export value under the APDP surging by 31 percent to R151.5bn last year from R115.7bn in 2014. The industry had an APDP-related trade deficit of R15.8bn in 2014 and R24bn in 2013. APDP-related exports last year comprised “a significant” 14.6 percent of total South African exports of R1.037 trillion compared with 11.7 percent in 2014, according to the latest SA Automotive Export Manual, which was released last week. The report is produced by the Automotive Industry Export Council (AIEC). Imports under the APDP increased by 10 percent to R146.2bn from R131.5bn in 2014 and comprised 13.4 percent of total South African imports of R1.087trln compared with 12.1 percent in 2014. The overall trade balance, which includes all

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automotive products and imported automotive replacement parts that are not linked to value addition in the country under the APDP, remained in deficit but narrowed to R45.2bn last year from R62.2bn in 2014 and R63.8bn in 2013. It said the broader automotive industry, through its well-integrated value chain from downstream to upstream activities, contributed 7.5 percent to South Africa’s gross domestic product (GDP). The vehicle and automotive component manufacturing industries accounted for 33.5 percent of total manufacturing output last year. Lamprecht said South African automotive firms, in contrast to many other industries, had proven to be resilient against adverse economic conditions due to the high level of integration with domestic component suppliers, a stable policy framework and export diversification. It said the broader automotive industry, through its well-integrated value chain from downstream to upstream activities, contributed 7.5 percent to South Africa’s gross domestic product (GDP). The vehicle and automotive component manufacturing industries accounted for 33.5 percent of total manufacturing output last year. Lamprecht said South African automotive firms, in contrast to many other industries, had proven to be resilient against adverse economic conditions due to the high level of integration with domestic component suppliers, a stable policy framework and export diversification. FAST MOVING CONSUMER GOODS MARCH HEADLINE INFLATION LIKELY TO DROP – ECONOMIST (News24, 18/4/2016) Headline inflation of 6.5% is forecast for March - down from 7% in February, emerging markets economist Peter Attard Montalto of Nomura said on Friday. It is important, in his view, that any interest rate hikes within the SA Reserve Bank's current Monetary Policy Committee (MPC) framework limit behavioural effects, which can increase foreign exchange pass-through and with it contain expectations and prevent wage inflation spirals. Montalto explained that, despite increasing underlying inflationary pressures, base effects are winning out in the short run. We see core inflation stable in March at 5.7%. This is a higher survey month with housing particularly providing two-way risk, while food price risks and general core risks are to the upside." He regards the drought as the biggest factor impacting the shifting underlying inflation picture. Other factors are forex pass-through, slowly recovering unit labour costs, higher energy prices and a slightly bigger, but still very small output gap. The so-called underlying "other factors" show since end-2014 that while underlying inflation is high at around 5%, it has fallen back to around 4%, Montalto explained. This is as a result of the slightly large output gap and the impact of lower cost-push pressures from contained real unit labour costs in 2015 in the retail sector - and economy more generally. As for food prices, Nomura's forecast is for a large spike higher in staple foods - such as grains and vegetables - giving way several months later to a peak in non-staples such as meat and processed food prices. It foresees that these would then have a much slower turnaround as they have longer pass-through cycles and are also more affected by higher sticky raw prices next year from the next harvest that is been under planted. This factor is key to Nomura's much higher inflation projection for next year compared to that of Sarb and the market. INTERMODAL PROPOSED TRUCK BAN COULD HIKE PRICE OF BASIC FOOD (Business Day, 18/4/2016) New regulations banning trucks on urban roads during peak hours could trigger a spike in the cost of essential goods. Transport Minister Dipuo Peters has signalled her intention to introduce amendments to the National Road Traffic Regulations of 2000, which will see trucks exceeding a gross vehicle mass of 9,000kg being banned from urban roads on weekdays between 6am and 9am and 5pm and 8pm. The minister made this known in April last year and published draft regulations for public comment in May 2015. The ministry cited congestion and the country’s high road mortality rate as the key drives for the proposed regulations. However, Road Freight Association spokesman Gavin Kelly said consumers would bear the brunt of this as nearly 20% and 19% of the price of bread and milk, respectively, factored transport and logistics costs. Mr Kelly said companies would have to change their delivery schedules, many of which were planned months in advance and this would have cost implications. The association estimates that 80% of goods are moved by road. In its public comment submission on the draft regulations, the Justice Project SA said that in an ideal world, the proposals would constitute a “no-brainer”. “Unfortunately, however, SA is not part of the ideal world, not even by a long shot,” it said. “The majority of freight and goods on supermarket shelves are conveyed on our roads due to the fact the rail network has been so neglected and mismanaged by the Department of Transport for a long time now.”

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STEEL GLOBAL STAINLESS STEEL OUTPUT CONTRACTS 0.3% Y/Y IN 2015 (Engineering News, 18/4/2016) Global stainless steel and heat-resisting melt shop production for 2015 edged down some 0.3% year-on-year to 41.5-million tons, with declines across the board - barring Asia with the exception of China - the latest figures from the International Stainless Steel Forum (ISSF) showed. Data from ISSF, released this week, showed that output of stainless steel in Asia, excluding China, ticked up 1.4% from 9.3-million tons in 2014 to nearly 9.5-million tons in 2015. China, however, recorded a 0.6% decrease in production, from 21.69-million tons in 2014, to 21.56-million tons in the year under review. During 2015, stainless and melt shop steel output from Western Europe/Africa decreased 0.7% to 7.51-million tons, from the 7.57-million tons achieved in 2014. Central/Eastern Europe’s output contracted 6.3% from 277 000 t to 259 000 t, while production from the Americas was down 2.3% to 2.7-million tons in 2015, from 2.8-million tons the year before. NOT JUST CHINA: JAPAN, SOUTH KOREA PUSH CHEAP STEEL AS WORLD REELS (Engineering News, 18/4/2016) As the world reels from a flood of cheap Chinese steel, other countries including Japan and South Korea are selling products overseas at prices as much as a third lower than in their home markets, according to industry data and officials. The under-pricing by the world's second and third biggest steel exporting countries underscores the pressure facing steelmakers around the globe as the industry grapples with chronic oversupply and sluggish demand. India's Tata Steel has blamed a flood of cheap steel imports for a decision to pull out of Britain, putting 15 000 jobs at risk, while one of Australia's only two steelmakers, Arrium Ltd, has been placed in administration, a form of bankruptcy. Top producer China has taken much of the blame for plant closures, but other steelmakers are similarly fighting to stay in business. Japanese companies are selling steel overseas cheaper than in the domestic market partly to compete with China, said an official at a Japanese steel producer, declining to be named because he didn't want to discuss pricing strategies publicly. The price is also higher locally to cover the "extras" that steelmakers provide clients such as specific delivery times and services including product quality that make it easier for customers to process them, the producer said. "That's something many foreign makers cannot offer," he said. Japan and South Korea export steel at prices that are 35% lower than their domestic prices, said Rao. "If they are making money in the domestic market, by exporting, as long as they're able to recover some contribution towards their fixed cost, they're pushing volume," he said. Countries, responding to rising imports and complaints from local producers, are imposing protections and raising objections through international channels. India in February set a floor price for imports of steel products to deter exporters from undercutting domestic mills, having seen imports from Japan and South Korea jump by almost half in April-February. FUEL OIL TUMBLES AFTER OUTPUT FREEZE TALKS FAIL OVER SAUDI DEMANDS (Mineweb, 18/4/2016) Oil tumbled after output talks Sunday between the world’s biggest producers ended without an agreement, outweighing the supply impact of strikes that cut 60% of Kuwait’s output. Futures fell as much as 6.8% in New York. The summit in the Qatari capital faltered after Saudi Arabia and other Gulf nations wouldn’t agree to a deal unless all OPEC members joined including Iran, which didn’t attend the meeting, Russian Energy Minister Alexander Novak told reporters afterward. Separately, an open-ended labor dispute cut production by Kuwait, OPEC’s fourth-largest member, to 1.1 million barrels a day, according to Saad Al-Azmi, deputy chief executive for finance and spokesman at Kuwait Oil Co. Sixteen nations representing about half the world’s output gathered Sunday to seek a solution to the global supply glut that pushed prices to a 12-year low earlier this year. The plunge in Kuwait’s production “is just shocking,” Edward Bell, a commodities analyst at Dubai-based bank Emirates NBD PJSC, said Sunday by phone. “There were expectations there was going to be a freeze agreement excluding Iran,” said Mike Wittner, head of oil market research at Societe Generale SA. “It’s bearish, no question, because the market was clearly pricing something in.” West Texas Intermediate for May delivery lost as much as $2.75 to $37.61 a barrel on the New York Mercantile Exchange and was at $37.93 at 6:07 a.m. Hong Kong time. The contract fell $1.14, or 2.8%, to $40.36 on Friday, the biggest decline in almost two weeks. Total volume traded was about 25% above the 100-day average. Brent for June settlement dropped as much as $3, or 7%, to $40.10 a barrel on the London-based ICE Futures Europe exchange. The contract lost 74 cents, or 1.7%, to $43.10 on Friday. The global benchmark was at a $1.19 premium to WTI for June

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MINERAL MINING DRAFT CHARTER IS “ECONOMIC SUICIDE” FOR SA (MiningMx, 18/4/2016) Mining minister, Mosebenzi Zwane, has caused significant damage to South Africa’s economy with the release of a new draft Mining Charter, said a senior mining executive. The source, which spoke to Miningmx on condition of anonymity, dubbed the latest actions of the Department of Mineral Resources (DMR) ‘Zwane-gate’ – a move that will have “serious repercussions for the whole of South Africa, not just the mining industry”. On Friday, the DMR released the new draft that drastically changes empowerment targets and effectively seeks to crush the declaratory order that currently serves before the North Gauteng High Court in Pretoria about the “once-empowered-always-empowered” principle. “This (new draft charter) is economic suicide,” the source said. “It’s the most idiotic time to embark on a process like this. “There are certain ministries within government that are working very hard to avoid a ratings downgrade, yet you have a ministry like this that undermines everything that the Finance Minister (Pravin Gordhan) is trying to counter a downgrade.” This faction of government does not have the best interests of South Africa at heart. They serve selfish agendas, the source said. The new draft Charter stipulates that mining companies need to perpetually re-empower black economic partners even if the previous partners sold off their shares. But the source said the mining industry wouldn’t merely walk away from the dispute about the once-empowered-always-empowered principle. The new draft charter also sets new targets for local procurement from black companies. Previously, 40% of local goods had to come from black suppliers, but the new Charter increases these levels to 60%. “A lot of procurement is done with historically disadvantaged South Africans and companies,” the source said, “but you get to a point where you cannot accept lower quality products or higher costs just because you have to buy from these suppliers. You just can’t. You lose your competitive edge.” “You will see investors voting with their feet and it’s not only going to be in the mining space.” GENERAL STAGFLATION CREATES DILEMMA FOR SARB – REPORT (News24, 18/4/2016) Cape Town - The SA Reserve Bank (Sarb) remains entangled in a very different policy dilemma of stagflation, Futuregrowth Asset Management said in its monthly review for March. "Inflation at both producer (8.1%) and consumer (7.0%) levels have surprised many with the speed of acceleration, while economic growth remains anaemic. In addition, the particularly precarious balance of payment position - both in absolute and relative terms - necessitates a higher real repo rate," according to the review. In Futuregrowth's view, to the Sarb’s credit, it continued to focus on its mandate of maintaining price stability and for that reason raised the repo rate by another 75 basis points (bps) over the past quarter. As result, the repo rate has now increased by 2% from the cycle low. Locally, the combination of sustained and broad-based rand weakness and fast rising food prices have pushed Futuregrowth's 2016 and 2017 annual average inflation forecasts to 6.6% and 5.8% respectively. "We shall be keeping one eye on the core measure of inflation for a more reliable indication of underlying inflationary pressure, which is still below 6%, but rising," according to the review. Futuregrowth noted with what it called "a fair degree of concern" that SA is still saddled with a relatively weak external trade position, which in turn will remain a drag on the rand. "It remains a significant challenge to fund the shortfall considering the global backdrop and the relative unattractiveness of SA as a longer-term investment destination," said Futuregrowth. "Similarly, it leaves the Sarb with less room to manoeuvre since a deficit of this magnitude implies a higher real repo rate." CURRENCIES AND PRICES

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JSE AS AT 17:00PM 15 APRIL 2016

All Share Index

15/04 53,039 + 0.36%

Industrials Index

15/04 44,049 + 0.02%

Financials Index

15/04 42,439 + 0.007%

Top 40 Index

15/04 46,763 + 0.45%

Industrial 25 Index

15/04 71,468 + 0.92%

Financial 15 Index

15/04 15,497 - 0.01%

Resources 10 Index

15/04 30,656 - 0.88%

Alt-X Index

15/04 1,540 - 0.04%

WORLD INDICATORS

FOREX

Rand/Dollar 07:00 14.6608 + 0.69%

Rand/Pound 07:00 20.7374

+ 0.82%

Rand/Euro 07:00 16.5412 + 0.87%

COMMODITIES

Gold (usd/oz) 06:58 1,235.30 + 0.59%

Platinum (usd/oz) 06:37 980.00

- 0.71%

Brent (usd/barrel) 06:56 41.40 - 5.57%

WORLD MARKETS

Wall St (DJIA) 15/04 17,897 - 0.16%

Germany (DAX) 15/04 10,052

+ 0.25%

Japan (Nikkei) 06:55 16,359 - 2.91%

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3month

(Business Report, 18/4/2016)

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(TFR Commercial Management: Business Performance Dept)

Petrol/ Diesel Price

YR2016 06-Jan-16

03-Feb-16

02-Mar-16

06-Apr-16

04-May-16

01-Jun-16

06-Jul-16

03-Aug-16

07-Sep-16

05-Oct-16

02-Nov-16

07-Dec-16

COASTAL

95 LRP (c/l) 1194.00 1200.00 1131.00 1214.00

95 ULP (c/l) 1194.00 1200.00 1131.00 1214.00

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Diesel 0.05% (c/l) 972.47 910.47 925.47 1015.47

Diesel 0.005% (c/l) 977.87 914.87 928.87 1020.87

Illuminating Paraffin (c/l) 594.028 535.028 552.028 608.028

Liquefied Petroleum Gas (c/kg)

1892.00 1893.00 1773.00 1883.00

GAUTENG

93 LRP (c/l) 1209.00 1215.00 1146.00 1232.00

93 ULP (c/l) 1209.00 1215.00 1146.00 1232.00

95 ULP (c/l) 1237.00 1243.00 1174.00 1262.00

Diesel 0.05% (c/l) 1005.17 943.17 958.17 1053.87

Diesel 0.005% (c/l) 1010.57 947.57 961.57 1059.27

Illuminating Paraffin (c/l) 647.028 588.028 605.028 662.628

Liquefied Petroleum Gas (c/kg)

2074.00 2075.00 1955.00 2065.00

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 1214.00 1218.00 1196.00 1197,00

95 ULP (c/l) 1083.00 990.00 1086.00 1246.00 1246.00 1293.00 1334.00 1283.00 1214.00 1218.00 1196.00 1197,00

Diesel 0.05% (c/l) 997.49 895.49 969.49 1090.09 1085.09 1134.09 1138.09 1062.27 1008.27 1061.27 1052.27 1048,47

Diesel 0.005% (c/l) 1001.89 899.89 973.89 1096.49 1091.49 1137.49 1141.49 1067.67 1016.67 1067.67 1057.67 1055,87

Illuminating Paraffin (c/l) 697.728 595.728 668.728 690.828 685.828 727.828 733.828 663.828 608.828 658.828 656.828 657,028

Liquefied Petroleum Gas

(c/kg) 1829.00 1679.00 1833.00 1918.00 1935.00 2035.00 2091.00 2002.00 1887.00 1898.00 1851.00 1847,00

GAUTENG

93 LRP (c/l) 1102.00 1009.00 1105.00 1261.00 1261.00 1308.00 1352.00 1301.00 1232.00 1230.00 1208.00 1209,00

93 ULP (c/l) 1102.00 1009.00 1105.00 1261.00 1261.00 1308.00 1352.00 1301.00 1232.00 1230.00 1208.00 1209,00

95 ULP (c/l) 1124.00 1031.00 1127.00 1289.00 1289.00 1336.00 1377.00 1326.00 1257.00 1261.00 1239.00 1240,00

Diesel 0.05% (c/l) 1028.09 926.09 1000.09 1122.79 1117.79 1166.79 1170.79 1094.97 1040.97 1093.97 1084.97 1081,17

Diesel 0.005% (c/l) 1032.49 930.49 1004.49 1129.19 1124.19 1170.19 1174.19 1100.37 1049.37 1100.37 1090.37 1088,57

Illuminating Paraffin (c/l) 747.928 645.928 718.928 743.828 738.828 780.828 786.828 716.828 661.828 711.828 709.828 710,028

Liquefied Petroleum Gas

(c/kg) 2011.00 1861.00 2015.00 2100.00 2117.00 2217.00 2273.00 2184.00 2069.00 2080.00 2033.00 2029,00

(SAPIA online)

Daily prices for 15 April 2016

LME Official Prices, US$ per tonne

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Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1545.00 1533.00 4813.00 1708.00 8880.00 17245.00 1853.00 1695.00

Cash Seller & Settlement 1555.00 1535.00 4813.50 1708.50 8885.00 17250.00 1853.50 1696.00

3-months Buyer 1570.00 1545.00 4786.00 1718.00 8900.00 17155.00 1864.00 1720.00

3-months Seller 1580.00 1545.50 4787.00 1719.00 8920.00 17160.00 1864.50 1725.00

15-months Buyer 16870.00

15-months Seller 16920.00

Dec 1 Buyer 1635.00 1598.00 4775.00 1740.00 9035.00 1853.00 1795.00

Dec 1 Seller 1645.00 1603.00 4785.00 1745.00 9135.00 1858.00 1805.00

Dec 2 Buyer 1645.00 4775.00 1747.00 9135.00 1818.00

Dec 2 Seller 1650.00 4785.00 1752.00 9235.00 1823.00

Dec 3 Buyer 1698.00 4775.00 1777.00 9220.00 1793.00

Dec 3 Seller 1703.00 4785.00 1782.00 9320.00 1798.00

(London Metal Exchange, 18/4/2016)

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