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COMMODITY NEWSBRIEFS: 23 NOVEMBER 2015

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Natasha.Havenga@transnet.net

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IRON GOLDMAN: IRON ORE PRICE TO DECLINE NEXT TWO YEARS (Mining, 23/11/2015) Iron ore ended the week on a sour note falling to just above decade lows on Friday as bearishness overwhelms the sector on fears about the outlook for China, buyer of more 70% of the world's seaborne ore. Benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin declined to $45.00 a tonne, the lowest since July 8 and down more than 5% for the week. 58% Fe ore at the Qingdao Port declined more than 1% to $42.00 a tonne, just 20c above its record low on a spot price basis. Both grades are down nearly 12% over the past month. Prices must overshoot relative to marginal production costs in order to trigger mine closures on a sufficient scale. Today's peg is also the second lowest on record since The SteelIndex began tracking the spot price in November 2008. Iron ore traded at $44.10 a tonne on July 8 this year, before bouncing back more than 9% the very next day. Today's price compares with record highs above $190 a tonne hit in February 2011. Worldwide steel production fell 3.1% according to the World Steel Association, led by a 9% year on year drop in the US which did not benefit from new import duties levied by the US Dept of Commerce. Declining demand in China and oversupply will keep prices under pressure for at least the next two year investment bank Goldman Sachs said in a research note released yesterday. Platts News quoted Goldman as saying "prices must overshoot relative to marginal production costs in order to trigger mine closures on a sufficient scale" and the "divergence between production capacity and demand [is expected] to continue": STEEL S AFRICA’S OCTOBER STEEL PRODUCTION UP 23.8% Y/Y (Engineering News, 23/11/2015) South Africa’s crude steel production increased by 23.8% year-on-year to an estimated 650 000 t in October. Global crude steel production for the 66 countries reporting to the World Steel Association (worldsteel) was down 3.1% year-on-year to 134-million tons. The dip was owing, in part, to China’s crude steel production for October falling 3.1% year-on-year to 66.1-million tons, Japan’s production falling by 3.8% to 9-million tons, an 8.6% decrease in Italy’s crude steel production to 1.9-million tons, and a 20.9% drop in France’s production to 1.2-million tons. Spain also saw a drop in production to 1.3-million tons, 3.1% lower year-on-year, while Russia’s steel output fell 2.4% year-on-year of 5.7-million tons. The US also saw an 8.8% year-on-year fall in output to 6.7-million tons, while Brazil’s crude steel production for October was 3-million tons, a decrease of 2.3% on October 2014. On the other side of the scale, Germany produced 3.6-million tons of crude steel, a 2.7% year-on-year increase, while Turkey’s production climbed 2% year-on-year to 2.8-million tons. Ukraine produced 2.06-million tons of crude steel, up 6.4% compared with the same month in 2014. The crude steel capacity utilisation ratio for the 66

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countries in October was 68.3%, 3.4 percentage points lower than in October 2014. Compared with September, it fell by one percentage point. ITAC ON TRACK TO DELIVER DECISIONS ON STEEL TARIFFS (Business Report, 23/11/2015) The international Trade Administration Commission (Itac) is meeting its deadlines for investigations and determinations on a whole spectrum of tariff interventions applied for by the steel industry, and will have considered all applications by the end of this month. The commission is set to make recommendations for tariff reviews on 77 steel product codes as requested by the South African Iron and Steel Institute, ArcelorMittal South Africa and Evraz Highveld Steel and Vanadium, which have applied for the maximum 10 percent allowed for tariff protection from cheap imports. Itac spokesman Foster Mohale confirmed that the commission was considering recommendations for products that included flat-rolled, structural steel such as angles, shapes and sections of steel; reinforcing bar; wire rod and a number of cold-rolled and hot-rolled products. However, the industry is still grappling with the implications of the interventions and has yet to resolve the fear of downstream manufacturers that the higher tariffs will raise prices, forcing them to either face low margins or pass the costs on to the consumer. Itac’s recommendations are set to take effect in December and are likely to start internal disputes among downstream manufacturers. Industry responses to a recent Manufacturing Circle survey revealed that more engagement was needed to address the impact of the higher tariffs on producers that had imported out of necessity. Also, there was a lack of understanding of the codes and what had been designated for intervention. The survey also revealed that competitiveness would be compromised by the impact of the tariffs on downstream manufacturers and possible price hikes. FUEL VOPAK MULLS FURTHER SOUTH AFRICAN INVESTMENTS AS IT EXPANDS DURBAN FUEL STORAGE CAPACITY (Engineering News, 23/11/2015) Independent tank storage group Vopak, of the Netherlands, has completed the first phase of an expansion project at its Durban Island View operations, raising its fuel storage capacity to 174 000 m3. By the third quarter of 2016, Vopak South Africa, which is 30% owned by black-empowerment company Reatile Chemicals, expects to complete a subsequent phase, resulting in its Durban capacity rising to 234 000 m3. Based on an average car tank size of 50 l, the new storage capacity will have a capacity equivalent to filling more than 4.6-million cars. Vopak South Africa MD Erik Kleine will not be drawn on the value of the investments, but indicates that the projects have been driven by growing demand for petroleum products, as well as by the outcomes of the 2006 Moerane Report that identified the need for improvements to South Africa’s fuel storage and transport infrastructure. It also follows the commissioning, by Transnet, of the new multiproduct pipeline from Durban to Gauteng. The company, which has been in South Africa for over 20 years, is also conducting a feasibility studies into a terminal at Lesedi near Heidelberg, in Gauteng, as well as a multiproduct chemicals terminal in Richards Bay, in KwaZulu-Natal, which could include a liquefied petroleum gas storage facility. COAL EXXARO LIKELY TO MOVE MORE COAL IN FY2015; CUTS EXPANSION CAPEX (Mining Weekly, 23/11/2015) Coal and heavy minerals miner Exxaro expects coal production and sales volumes for the 2015 financial year to top that of the prior 12 months, noting in a market update this week that the scheduled ramp-up of the Medupi power station and the inclusion of coal output from Exxaro Coal Central (ECC) – formerly Total Coal South Africa – from September 1 had partially offset production slumps at the group’s tiered operations. Domestic sales were expected to increase 6% year-on-year to 2.3-million tons, while export sales were likely to see an 11% rise to 5.5-million tons. Commenting on the markets, Exxaro described domestic coal demand in the power-generation and steam coal markets as “stagnant, but stable”, while the dollar price of coal in international markets continued to test new lows. International prices had dropped below $50/t free-on-board for coal shipped from Richards Bay, in KwaZulu-Natal, with prices likely to remain at these levels in the short- to medium-term. “The continuing global oversupply of commodities is reflected in a reduction of the average dollar coal, iron-ore and titanium dioxide prices by 20%, 32% and 14% respectively, since the beginning of January. The company added that there remained strong demand for its higher- and lower-quality coal, despite the local metals sector – a key market for Exxaro coal – struggling to compete with cheap Chinese exports, weak demand and low international metal prices. In the reductants markets, Exxaro held that various companies in the ferroalloy sector continued to face financial difficulty as they struggled to compete globally owing to low ferroalloy prices and high local electricity prices, subduing the offtake of semicoke from the

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group’s reductants business unit. Looking ahead, the miner said strategic priorities in the next financial year included integrating and optimising ECC assets, developing Exxaro’s future black economic-empowerment shareholding strategy, evaluating its current shareholding in key investments and growing investor confidence in Exxaro’s prospects for the coal business. The company expected the global economy to remain subdued, as emerging markets continued to battle with low economic growth rates and commodity markets faced oversupply, particularly in iron-ore and coal. “Markets could also be impacted by the expected interest rate hikes in the US, as well as other global geopolitical events,” the group stated. GLOBAL COAL MARKET DECLINES FOR FIRST TIME IN 21 YEARS – EIA (Mining Weekly, 23/11/2015) The global coal industry has contracted for the first time in 21 years, as slowing growth in certain significant markets weighed on the industry’s outlook, the US Energy Information Administration (EIA) has found. According to an analysis by the EIA, global trade of coal grew dramatically from 2008 to 2013, but declined in 2014. China and India accounted for 98% of the increase in global coal trade from 2008 to 2013, but declines in the country’s import demand had led to falloffs in total world coal trade in 2014 and, based on preliminary data, in 2015 as well, the EIA advised on Friday. In its publication ‘Today in Energy’, the EIA stated that nearly all of the 47% growth in total world coal trade between 2008 and 2013, was driven by rising coal import demands by countries in Asia, specifically China and India. Coal trade in the rest of the world declined over the same period. However, data for 2014 and 2015 indicated a reversal of this trend, with declines in China's coal imports currently on pace to more than offset slight increases in other countries in both years. According to main contributor, EIA analyst Mike Mellish, China had imported 341-million short tons of coal in 2013, up from 45-million short tons in 2008, while India imported 203-million tons, up from 69-million tons in the same period. About 75% of China's coal imports and 90% of India's coal imports were steam coal, used mainly for electricity generation. Coking coal, used in the manufacture of steel, made up the remaining volumes. While China's coal imports have been declining in 2014 and 2015, India's imports continued to rise in 2014 and through the first half of 2015, as coal demand increased at a faster pace than domestic supplies. In India, efforts were underway to substantially increase domestic coal production over the next few years and to complete three significant rail transportation projects to increase coal shipment from significant producing regions in north-eastern India, to demand centres in other parts of the country. Although India's coal producers have already increased domestic production in 2014 and through the first few months of 2015, the first of India's three major coal railway projects, the Jharsuguda-Barpali railway link, was not scheduled to be completed until about 2017. The EIA found that increases in exports from Indonesia and Australia met most of the expansion in international coal trade between 2008 and 2013. Indonesia's exports increased by 247-million tons, accounting for 56% of world coal export growth. Australia's exports increased by 106-million tons, accounting for a further 24% of the global increase. Other exports from Eurasia (49-million tons) and the US (36-million tons) accounted for almost all of the remaining increase in coal exports during this period. GRAIN DROUGHT PUTS STRAIN ON SA’S NEIGHBOURS (Business Report, 23/11/2015) Countries in the southern African region, like Zimbabwe and Zambia, have to prepare for further strains to their fiscal positions, as dry weather conditions have worsened into a drought. The conditions will present a double blow to the regional economies, which are already set for marked economic decline, because of continuously softer commodity prices. Zimbabwe and Zambia are heavily reliant on mining for economic growth amid warnings that they diversify their economies. Like South Africa, economies in the region are dependent on agriculture, which is now poised for a slowdown because of the dry weather conditions that experts say are being occasioned by the El Niño weather phenomenon associated with extreme temperatures and floods. Poor rainfall will further worsen Zimbabwe’s economic performance and productivity, with the growth outlook for 2015 already cut back to 1.5 percent with agro-processing companies such as Delta Corporation, a unit of SABMiller, and Hippo Valley, the Zimbabwe listed subsidiary of Tongaat Hulett, expected to be the hardest hit. The overall cost and impact on the economy will likely be significant, according to other experts. Regional economies are major exporters of beef to the EU, a lucrative market that is key for much needed revenues, but the drought will affect beef production in countries such as Zimbabwe, Namibia and others.

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NON-FERROUS METALS ZINC REBOUNDS FROM SIX-YEAR LOW AS MOST METALS REVERSE DECLINES (Mineweb, 23/11/2015) Zinc in London climbed by the most in more than a month from 2009 lows, leading other metals higher as the market took a breather from its prolonged slump. The metal used for galvanizing steel increased as much as 3.2% and traded 2.4% higher at $1 567 a metric ton as of 3:45pm in Shanghai. That reversed losses earlier in the day of as much as 1.2%. Lead gained 1.7% while aluminum rose 0.7% and copper 0.2%. Most metals traded on the London Metal Exchange fell to multi-year lows this week, with nickel dropping to its weakest in 12 years. The London Metal Exchange’s index of six industrial metals has lost 26% in 2015 and is heading for its biggest annual decline since the global financial crisis as weakening growth in China undermines demand and exacerbates oversupply. Goldman Sachs Group said in a November 18 note that it remains underweight commodities for the next 12 months as supply adjustments to date have been insufficient, while demand has either done too little to offset this or seen outright declines. CURRENCIES AND PRICES

JSE AS AT 17:00PM 20 NOVEMBER 2015

All Share Index 20/11 52,241

+ 124.32 + 0.24%

Industrials Index 20/11 44,378

+ 124.98 + 0.28%

Financials Index 20/11 44,680

+ 200.29 + 0.45%

Top 40 Index 20/11 46,963

+ 111.51 + 0.24%

Industrial 25 Index 20/11 71,887

+ 137.71 + 0.19%

Financial 15 Index 20/11 16,595

+ 113.63 + 0.69%

Resources 10 Index 20/11 28,450

- 29.27 - 0.10%

Alt-X Index 20/11 1,534

+ 15.71 + 1.03%

WORLD INDICATORS

FOREX

Rand/Dollar 06:30 14.0243

+ 0.01 + 0.07%

Rand/Pound

06:30 21.2340

- 0.17 - 0.78%

Rand/Euro 06:30 14.8780

- 0.16 - 1.08%

COMMODITIES

Gold (usd/oz) 06:30 1,071.25

- 11.55 - 1.07%

Platinum (usd/oz)

06:30 849.53

- 0.62 - 0.07%

Brent (usd/barrel) 06:30 44.15

- 0.03 - 0.07%

WORLD MARKETS

Wall St (DJIA) 20/11 17,824

+ 91.06 + 0.51%

Germany (DAX)

20/11 11,120

+ 159.88 + 1.46%

Japan (Nikkei) 20/11 19,880

+ 20.00 + 0.10%

3Month

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(Business Report, 23/11/2015)

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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 1214.00 1218.00 1196.00

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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

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

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

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

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

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

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

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

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

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

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

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

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 20 November 2015

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LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1570.00 1474.50 4685.00 1615.00 8895.00 14790.00 1576.50 1695.00

Cash Seller & Settlement 1570.50 1475.00 4690.00 1617.00 8900.00 14795.00 1577.50 1700.00

3-months Buyer 1575.00 1487.00 4652.00 1623.00 8930.00 14700.00 1592.00 1710.00

3-months Seller 1580.00 1487.50 4655.00 1625.00 8935.00 14750.00 1592.50 1720.00

Dec 1 Buyer 1575.00 1528.00 4645.00 1655.00 8990.00 1623.00 1755.00

Dec 1 Seller 1585.00 1533.00 4655.00 1660.00 9090.00 1628.00 1765.00

15-months Buyer 14625.00

15-months Seller 14675.00

Dec 2 Buyer 1588.00 4645.00 1690.00 9085.00 1648.00

Dec 2 Seller 1593.00 4655.00 1695.00 9185.00 1653.00

Dec 3 Buyer 1648.00 4645.00 1713.00 9165.00 1668.00

Dec 3 Seller 1653.00 4655.00 1718.00 9265.00 1673.00

(London Metal Exchange, 23/11/2015)

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