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COMMODITY NEWSBRIEFS: 18 MARCH 2016

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Natasha.Havenga@transnet.net

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AUTOMOTIVE MERCEDES-BENZ SA TO START HYBRID PRODUCTION, PREMIUM MARKET TO FACE HEADWINDS (Engineering News, 18/3/2016) Mercedes-Benz South Africa (MBSA) was ramping up to start production of the C350e plug-in hybrid at the company’s Eastern Cape plant, said MBSA CEO and executive director manufacturing Arno van der Merwe on Thursday. Speaking in

East London, Van der Merwe said the C-Class hybrid ⎯ most likely the first hybrid to be produced in a South African plant – would be a big step in “developing MBSA’s technical assembly capability”. The C350e would be available in the local market towards the end of the year. It would also be exported from East London. MBSA last year produced 106 700 vehicles. The C-Class made up 102 200 of this number and trucks and buses 4 500 units. This was a massive jump from the 54 400 units assembled in 2014, made up of 48 100 C-Class models and 6 300 trucks and buses. C-Class exports reached around 93 500 units in 2015, to more than 80 countries, up from the 33 688 units exported in 2014, when the plant was still ramping up production of the new C-Class. MBSA production and export numbers both reached record highs in 2015, said Van der Merwe. He said the East London plant benefited from an investment of R500-million in 2015, in an effort to increase production capacity by 25%. This added to the R5-billion investment made from 2011 to 2015 to produce the new C-Class in South Africa. The increase in exports, the fulfilment of a long-term strategy, provided MBSA with a hedge, “to a degree”, against a fluctuating rand, noted Van der Merwe. He added that every company in South Africa would like “some form of predictability and stability” when it came to currency movements, as “dramatic fluctuations in short periods were difficult to manage and forecast”. However, he believed that the weak rand also provided some opportunities for South Africa in terms of exports, which should also flow through to other industries “in time”. STEEL AMSA HIKES STEEL PRICE 11% AS IT HAEMORRHAGES R300M/MONTH (MiningMx, 18/3/2016) Arcelormittal South Africa (AMSA) announced steel price increases of up to 11% – more than double inflation – in an effort to keep its Vanderbijlpark Works afloat – a steelmaking facility that is currently losing R300m a month. Themba Nkosi, GM of AMSA’s human resources, corporate communications and stakeholder affairs, said today the Vanderbijlpark Works was of critical importance but it continued to face cost pressures including the recently announced 9.4% increase in electricity costs. There had been also been an increase in the cost of iron ore following a 14% increase over the last month of the mineral (but down just below 5% year-on-year) owing to restocking of steel in China. AMSA said in August last year that it would cut 400 jobs following a restructuring of its Vereeniging Works and said a review of operations had been extended to

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Vanderbijlpark. The South African government had agreed to provide some import duty protection against Chinese imports whilst Sishen Iron Ore Company, a subsidiary of Kumba Iron Ore, had also agreed to lower its iron ore sales price to AMSA. FUEL OIL PRICES CLIMB ON APRIL PRODUCERS' MEETING (News24, 18/3/2016) Oil prices extended their gains in Asia on Thursday after key producers agreed to meet next month to discuss limiting output and stabilise a long-running price decline. Qatar's Energy minister Mohammed al-Sada confirmed that key producers from within and outside the Opec cartel will meet on April 17 in Doha, stoking hopes of an agreement to ease a global supply glut. The initiative is backed by 15 countries accounting for about 73% of global oil output, said the minister, who also serves as president of the Organisation of the Petroleum Exporting Countries (Opec). Russian Energy Minister Alexander Novak, who supports the initiative, said Iran had indicated that it is "ready to participate" in the meeting, days after Tehran had warned it would not consider any limits until it had roughly doubled production to four million barrels a day. The news sent oil prices surging and at around 03:00 GMT; US benchmark West Texas Intermediate (WTI) for delivery in April climbed 65 cents, or 1.69%, to $39.11. Brent for May rose 38c, or 0.94%, to $40.71. WTI rose 5.8% and Brent advanced 4.1% to firmly close above $40 a barrel on Wednesday. Phillip Futures analyst Daniel Ang however doubted if the price rise will last as the market remains oversupplied and it was still unclear whether the producers will reach agreement. COAL ARE COAL’S DAYS NUMBERED? (Mineweb, 18/3/2016) South Africa’s pledge to fight climate change at the COP21 conference in Paris last year, doesn’t necessarily mean that

coal’s days are numbered – just yet. Coal, considered a “dirty” fuel due to the large amounts of carbon dioxide (CO₂) – a gas known to increase the greenhouse effect in the atmosphere and lead to global warming – released when it burns, is the mainstay of the country’s energy mix. In 2015, 65% of coal sold locally went toward meeting the country’s power requirements. A total of 93% of electricity generated came from coal, says Rosemary Falcon, South Africa Chair in Clean Coal Technology at Wits University, at the Fossil Fuel Foundation’s Independent Power Generation Conference. But South Africa’s commitment to the Paris Agreement, which seeks to limit global warming to 2°C until 2100, has raised several questions about the future of coal use in the country. While the “writing is on the wall” for coal, how the outcomes of COP21 and the country’s commitments to the international community will affect its energy mix remain unclear, he said. However, some clarity is expected this year, with the release of the Integrated Energy Plan, Gas Utilisation Master Plan, and Integrated Resource Plan for electricity. Collins said he would advise coal producers not to make definitive long-term plans but rather make use of scenario planning and “to be prepared to change”. He also warned against relying on the export market. “Whoever is thinking that India is going to save the world, needs to investigate that very carefully,” he said citing the country’s goal to become “self-sufficient” as well as data from Bloomberg New Energy Finance, which deduces that Indian coal imports would only increase at a compound annual growth rate of 0.9% from 2020 to 2030 “in an excessively pessimistic” Indian production scenario. GRAIN THREE RAILWAYS IN JOINT EFFORT TO FEED MAIZE-HUNGRY ZIMBABWE (FTW, 18/3/2016) Joining this country’s Transnet Freight Rail (TFR) as a transporter of maize imports into Zimbabwe is Mozambique’s Portos e Caminhos-de-Ferro (CFM) – both working in tandem with the National Railways of Zimbabwe (NRZ). Zim’s agriculture minister, Joseph Made, has estimated that the country needs to import 700 000 tons of maize between May and the next harvest in 2017 to stave off starvation as a result of the drought across southern Africa. The director-general of NRZ, Lewis Mukwada, told the Southern Times that the maize would be imported through the ports of Maputo and Beira in Mozambique and a number of SA ports. Zimbabwe and other countries in the Southern African Development Community (SADC) have started importing the grain from South America - particularly from Brazil and Argentina, according to Macauhub News.

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MINERAL MINING COM RAILS AGAINST ‘UNDUE PRESSURE’ AS STATE CAPTURE UPROAR GROWS (MiningMx, 18/3/2016) South Africa’s Chamber of Mines (CoM) joined business and civil organizations, as well as parliamentarians, in condemning allegations the Gupta brothers – Atul, Rajesh and Ajay – had been involved in the appointment of government ministers. It also added its own twist to recent events, described as “state capture”, saying that it noted links between the Gupta family and the recently appointed South African mines minister, Mosebenzi Zwane, and his officials. The CoM was most concerned, however, by reports that mining companies were being inappropriately placed “under undue pressure” for not having complied with the country’s black economic empowerment regulations, or for alleged health and safety abuses. Said the CoM: “Most concerning to the chamber are reports that mining companies are being placed under undue pressure via inappropriate section 93 notices for alleged failure to meet the ownership requirements of the charter when the subject matter is presently before the court for a ruling, or section 54 mine safety stoppage notices, given the damage these can do to the industry and investor confidence”. An industry source told Miningmx that reports of intimidation of mining companies had increased in the last six months following the surprise appointment of Zwane as mines minister in September. The CoM said it noted the “… allegations of links of the Minister of the Department of Mineral Resources to the Gupta family, and allegations that some of his special advisors are linked to the boards of the Gupta family companies”. It said recent events was “… making the mining sector ask questions about this matter”. The chamber said the South African mining sector was “in crisis” and that stability and certainty as well as fair treatment of licensing applications was necessary. “Allegations of corruption and undue political influence in licensing decisions are not in the interests of the industry or the country,” it said. One of the few executives to have spoken on the matter is Bernard Swanepoel, the former CEO of Harmony Gold and Village Main Reef. He told the Sunday Times in February, 2015 that it was naive to hope that business leaders could openly criticise the South African government as it may cost their companies. In June, the Junior Indaba conference that Swanepoel helps organise, held a public vote in which 31% of some 200 delegates said they could not do “honest business” with the DMR. David Msiza, the chief inspector of mines, and current interim director-general of the DMR, said the outcome of the survey was “regrettable”. Speaking on condition of anonymity, a senior South African mining executive, told Miningmx this week that exasperation with the DMR was one of the reasons why the CoM had decided to challenge the interpretation of the Mining Charter in the High Court. NON-FERROUS METALS SUBDUED OUTLOOK FOR ALUMINIUM IN S AFRICA AND GLOBALLY (Engineering News, 18/3/2016) South Africa’s aluminium export growth is expected to remain subdued this year at 0.4% and at just under 1.2% in 2017, according to the Steel and Engineering Industries Federation of Southern Africa (Seifsa). Speaking at the Aluminium Federation of South Africa’s International Aluminium conference in Cape Town Seifsa chief economist Henk Langenhoven noted that this subdued growth rate was in line with commodity prices, which he believed would remain under pressure until at least 2020, but possibly beyond. “All indications are that the commodities ‘supercycle’ is in a declining and consolidation phase, [but] we’re probably not at the bottom. The supercycle hopefully moving sideways and could take another four to five years,” he said. Langenhoven told conference delegates that China, which was rebalancing its economy to be more consumer-driven, had an overcapacity in almost every industrial production line and sector, which had a ripple effect on industry as a whole. Langenhoven noted that 70% of aluminium produced in South Africa was exported, therefore, the drop in commodity prices and exports had hurt the South African economy – “a small and extremely open” economy that derived 60% of its gross domestic product from exports and imports, said Langenhoven, adding that mining, metals, engineering and the automotive sector made up most of the foreign exchange earned by South Africa. Langenhoven said low and unstable international aluminium prices were the “greatest fear” for primary aluminium producers, while electricity price inflation remained a major issue in South Africa. Instability of electricity supply, long-term electricity price contracts and low business confidence would also put a squeeze on the industry. Globally, the industry was also in an extremely tight spot. Global commodity analyst CRU principal consultant for aluminium primary and products Eoin Dinsmore said he expected smelter closures in China, the US and Europe and that prices would remain under pressure from lower Chinese growth and high inventories. There was, however, a glimmer of hope for African producers. “In Africa, primary aluminium demand has risen. We expect strong demand in Africa over the next five years.” Dinsmore added that rolled aluminium products would benefit from the move to aluminium cans in the beverage industry, while the shift from steel to aluminium vehicles would also be a

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welcome boost. “Generally, though, we see prices remaining under pressure. The strong dollar, the weak outlook for energy and the weak outlook for China means the London Metal Exchange (LME) aluminium price will remain weak,” he concluded. POTENTIAL TO RAMP UP EMPLOYMENT IN DOWNSTREAM ALUMINIUM INDUSTRY (Engineering News, 18/3/2016) Aluminium fabricator Hulamin has outlined ways to substantially grow the aluminium industry supply chain and boost employment. CEO Richard Jacob said it was possible to create 29 000 jobs in the industry by 2018, compared with the 16 000 registered in 2011. He told the International Aluminium Conference and Exhibition in Cape Town that there was scope for growth in everything from electrical cable and aluminium for infrastructure to the renewable-energy industry, beverage cans and cars. He pointed out that, compared with other countries, South Africa had a low per capita consumption of aluminium of 3.5 kg per capita, compared with 7.4 kg in Brazil, 10.5 kg in China, 8.3 kg in Mexico and 25.9 kg in the US. Jacob said there was potential to boost South Africa’s per capita consumption to 7 kg per capita. “I believe 7 kg per capita is very possible within the next five years. The 2011/12 numbers show that demand for aluminium is 180 000 t/y. We believe we can generate growth of 300 000 t/y to 400 000 t/y worth of products,” said Jacob. Already a start had been made with the move from steel to aluminium beverage cans. Rolled aluminium is used in beverage cans. This had led to growth in recycling and demand for secondary aluminium. In a recent agreement, Nampak had doubled Hulamin’s offtake. Hulamin is the largest beneficiator of aluminium in South Africa, adding value to about 220 000 t/y of aluminium. Its turnover was R8.4-billion in 2015. It exports 70% to 75% of its products to customers in 50 to 60 countries around the world. They are involved in the fields of packaging, transport and automotive, construction, architecture and infrastructure, as well as general engineering industries. TRANSNET See article “THREE RAILWAYS IN JOINT EFFORT TO FEED MAIZE-HUNGRY ZIMBABWE” under heading GRAIN GENERAL RESERVE BANK RAISES REPO RATE BY 25 BASIS POINTS TO 7% (Engineering News, 18/3/2016) South Africa's Reserve Bank raised its benchmark repo rate by 25 basis points to 7% on Thursday as it tries to tame rising inflation despite slow growth. Central Bank Governor Lesetja Kganyago said the monetary policy committee remained concerned about the weak growth outlook amid negative business and consumer confidence, but it assessed the risk to the growth outlook to be on the downside. "Given the upside risks to the inflation forecast and the protracted period of the expected breach, the MPC decided that further tightening was required to complement the previous moves," Kganyago told a news conference. The bank targets inflation at between 3% and 6%. Two-thirds of the 30 economists and analysts surveyed by Reuters last week said the central bank would leave rates unchanged to support economic growth, while the remaining third called for a 25 basis point rise to 7.0%. But some economists who previously had a 'hold' view on rates changed their predictions this week to 'raise' after the rand fell sharply as investors fretted about a public row between police and Finance Minister Pravin Gordhan and a possible rating downgrade. Markets have also been rattled by claims that a wealthy family with close ties to President Jacob Zuma may have been behind his decision to sack the country's respected finance minister Nhlanhla Nene in December. But the rand recovered on Thursday after dovish comments from the U.S. Federal Reserve and extended gains against the dollar after the local rate decision, while government bonds remained firmer. The currency was trading at 15.3350 per dollar as of 1333 GMT, up nearly 2%. CURRENCIES AND PRICES

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JSE AS AT 17:00PM 17 MARCH 2016

All Share Index

17/03 53,191 + 0.96%

Industrials Index

17/03 42,813 + 1.88%

Financials Index

17/03 42,385 + 2.27%

Top 40 Index

17/03 47,170 + 0.73%

Industrial 25 Index

17/03 72,046 - 0.03%

Financial 15 Index

17/03 15,711 + 2.82%

Resources 10 Index

17/03 30,747 + 2.23%

Alt-X Index

17/03 1,505 + 0.15%

WORLD INDICATORS

FOREX

Rand/Dollar 06:32 15.2218 - 2.69%

Rand/Pound 06:40 21.9675

- 1.39%

Rand/Euro 06:40 17.2188 - 1.87%

COMMODITIES

Gold (usd/oz) 06:39 1,262.40 - 0.02%

Platinum (usd/oz) 06:18 987.00

+ 1.39%

Brent (usd/barrel) 06:28 41.50 + 2.90%

WORLD MARKETS

Wall St (DJIA) 17/03 17,481 + 0.90%

Germany (DAX) 17/03 9,892

- 0.42%

Japan (Nikkei) 06:42 16,682 - 1.50%

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3month

(Business Report, 18/3/2016)

(TFR Commercial Management: Business Performance Dept)

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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

95 ULP (c/l) 1194.00 1200.00 1131.00

Diesel 0.05% (c/l) 972.47 910.47 925.47

Diesel 0.005% (c/l) 977.87 914.87 928.87

Illuminating Paraffin (c/l) 594.028 535.028 552.028

Liquefied Petroleum Gas (c/kg)

1892.00 1893.00 1773.00

GAUTENG

93 LRP (c/l) 1209.00 1215.00 1146.00

93 ULP (c/l) 1209.00 1215.00 1146.00

95 ULP (c/l) 1237.00 1243.00 1174.00

Diesel 0.05% (c/l) 1005.17 943.17 958.17

Diesel 0.005% (c/l) 1010.57 947.57 961.57

Illuminating Paraffin (c/l) 647.028 588.028 605.028

Liquefied Petroleum Gas (c/kg)

2074.00 2075.00 1955.00

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

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(SAPIA online)

Daily prices for 16 March 2016

LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1555.00 1494.00 4944.50 1767.50 8455.00 16890.00 1738.00 1675.00

Cash Seller & Settlement 1565.00 1495.00 4945.00 1768.00 8460.00 16910.00 1738.50 1685.00

3-months Buyer 1580.00 1509.00 4935.00 1774.00 8500.00 16770.00 1744.50 1690.00

3-months Seller 1590.00 1510.00 4935.50 1776.00 8550.00 16780.00 1745.00 1700.00

15-months Buyer 16525.00

15-months Seller 16575.00

Dec 1 Buyer 1650.00 1575.00 4895.00 1788.00 8650.00 1748.00 1745.00

Dec 1 Seller 1660.00 1580.00 4905.00 1793.00 8750.00 1753.00 1755.00

Dec 2 Buyer 1627.00 4890.00 1795.00 8750.00 1728.00

Dec 2 Seller 1632.00 4900.00 1800.00 8850.00 1733.00

Dec 3 Buyer 1687.00 4890.00 1825.00 8835.00 1717.00

Dec 3 Seller 1692.00 4900.00 1830.00 8935.00 1722.00

(London Metal Exchange, 18/3/2016)

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