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COMMODITY NEWSBRIEFS: 9 MAY 2016

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Natasha.Havenga@transnet.net

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IRON WORST WEEK FOR IRON ORE PRICE SINCE OCTOBER 2011 (Mining, 9/5/2016) On Friday the Northern China benchmark iron ore price fell 3% to $57.70 per dry metric tonne (62% Fe CFR Tianjin port) according to data supplied by The Steel Index, capping a brutal week of trading. Losses since Monday came to 11.8%, the worst weekly performance since October 2011, when prices dropped from$142 per tonne to $116 a tonne over five days of trading. Year to date the iron ore price is averaging $51.36 a tonne. Despite the bad start to May, iron ore has managed to hold onto 34% gains in 2016 and a 55% recovery from nine-year lows reached mid-December. The fall in steelmaking raw material prices comes as commodity investment fever among Chinese speculators begin to cool and inventory at the country's ports start to pile up again. After dropping to near 75 million tonnes during the summer months of 2015 stocks are now a shade under 100 million tonnes and within shouting distance of all-time record set in 2014. Chinese commodity import data set to be released over the weekend would give further indication of the direction of prices. Chinese steel mills continue to opt for seaborne cargoes which now make up nearly 80% of blast furnace feedstock. For the first quarter imports are up 6.5% year on year despite weather-related disruptions at Port Hedland in West Australia, the world's busiest dry bulk terminal. In December imports reached a record 96 million tonnes and cargoes for the whole of 2015 also set a new record of 952.7 million tonnes. GOLDMAN PUTS IRON ORE AT $40 BY YEAR-END (Mining, 9/5/2016) Goldman Sachs says iron ore will keep dropping throughout 2016, though not as much as it initially forecast, citing continued oversupply as the primary culprit. In a report, the influential investment bank raised its quarterly outlook for iron ore by 47 percent to US$55 a tonne – which according to Sachs, would be the metal's peak for the year. From there, it has iron ore steadily falling from July to September to $45, dropping to $40 for the fourth quarter. While the bearish predictions throw bad news in the way of the steelmaking commodity, which just over two weeks ago hit a 16-month high, the prices are actually a hefty increase over Goldman Sachs' earlier projections for iron ore. Its outlook shows a 47 percent increase for Q1, a 20 percent jump for the third quarter, and a 14 percent bump for the fourth quarter. Back in November, when iron ore plumbed a depth of $42 a tonne – the second lowest price on record since The Steel Index began tracking it in 2008 – Goldman declared that iron ore would stay low for the next two years due to the big gap between production capacity and demand, and that more mines need to close for the price to recover. Goldman analysts quoted by Bloomberg warned in their recent report that the rally in iron ore so far this year will, naturally, contribute to the supply overhang.

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STEEL AMSA SALDANHA WORKS VIABLE, BUT COMPANY STILL ON KNIFE-EDGE (MiningMx, 9/5/2016) ArcelorMittal South Africa (AMSA) said its Saldanha steelworks was viable following a review of the operation, but added that the sustainability of the company as a whole turned on a combination of factors including government support for import tariffs. Commenting in its first quarter production report, the South African steel producer said support for a 10% tariff duty on certain products had been formalised by the International Trade Administration Commission (ITAC). It was now waiting on the government. There were also steps to establish a pricing mechanism for local flat steel with the Department of Trade & Industry, although the process was not yet complete. The National Treasury was also being consulted regarding a proposal for the designation of local primary steel for state procurement in various infrastructural projects. Commenting on the viability of the Saldanha Works, AMSA said that based on current prices the operation “remains viable at this stage”. It added, however, that controlling the price of electricity was critical to it remaining open. “Therefore, in the long term, Saldanha Works needs alternative energy solutions such as access to affordable electricity which is vital to ensure its long-term sustainability,” it said. AMSA was “… at an advanced stage in exploring various options which included independent gas-to-power producer located in Saldanha,” the company said. “Such a project relies strongly on government support for the importation of liquefied natural gas, and other regulatory approvals,” it said. AMSA said in August last year that it would cut 400 jobs following a restructuring of its Vereeniging Works and that a review of operations had been extended to 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. Commenting on its first quarter production figures, AMSA said liquid steel production totalled 122,000 tonnes, a decline of 9% compared to the first quarter of the previous financial year. The lower output was put down to disruptions including the closure of the Vaal Meltshop and the closure and restart of a blast furnace at Vanderbijlpark Works. Domestic sales increased by 12,000t or 1.4% with long products higher by 23,000t and flat products lower by 11,000t compared to the first quarter of 2015. Market conditions locally and internationally remained challenging. AMSA INSISTS FURTHER PROTECTION STILL REQUIRED DESPITE RECENT PRICE INCREASES (Engineering News, 9/5/2016) Safeguard duties, in addition to the 10% protection already introduced on a range of steel products entering South Africa, “remain critical in the short term to ensure the future sustainability of primary steel production”, ArcelorMittal South Africa (AMSA) said on Friday. Releasing an operational update for the quarter ended March 31, the JSE-listed company reported that safeguard duty applications submitted to the International Trade Administration Commission of South Africa (Itac) had been reviewed by the commission and that queries raised had been addressed through a resubmission. “The investigation in respect of safeguard duties relating to hot-rolled coil (HRC) has been initiated. Due to the combination of certain products one further application remains outstanding and will be finalised shortly,” the company said in a statement to shareholders. Itac had recently recommended the imposition of a 10% duty on HRC and other bars and rods, which would be implemented once the relevant government processes had been completed. However, AMSA argued that further safeguard duties would still be required to buffer it and other local producers from unfair imports arising primarily as a result of overcapacity in China, which had led to global oversupply. “Steel industries around the world continue to struggle and the South African steel industry is not immune to the international trend.” It added that, during January and February, 164 000 t of steel was still imported into the country, of which 79 000 t, or 48%, was HRC. “Despite the completion of the 10% duties . . . it should be pointed out that the implementation of safeguards remains critical to address the issue of imports and ensure the sustainability of the industry and the company.” Itac had indicated previously that it planned to complete its investigations into AMSA’s safeguard applications by mid-year. AMSA was pressing ahead with its safeguard applications despite recent price increases, which it attributed to rising international prices and higher input costs. It insisted, too, that the increases were not a response in increased levels of protection. “The base price of HRC internationally has increased by $86/t from December 2015 to March 2016. At the same time the main elements of the raw material basket, namely coal, iron-ore and scrap, have also moved up $6/t, $16/t and $26/t respectively.”

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COAL RESGEN INKS R2.1BN CONTRACT FOR BOIKARABELO COAL VENTURE (MiningMx, 9/5/2016) Resource Generation (Resgen), the Johannesburg- and Sydney-listed coal development firm, edged closer to securing more than $400m in capital funding for its six million tonne/year (mtpa) Boikarabelo project in South Africa’s Limpopo province. The group today announced it had signed a letter of intent with Sedgman Limited, an engineering, procurement and construction company specialising in coal projects for a $141m (R2.1bn) contract. The agreement helped de-risk the project as Resgen seeks finalisation of funding, the company said. The contract price was a substantial saving over the previously announced estimate and was achieved as a result of the Sedgman design offering a smaller footprint with associated capital savings while offering equal, if not improved, production outputs, said Resgen. Boikarabelo was originally designed to produce export quality coal with shareholder, Noble Group, signing an offtake agreement in return for project funding. However, Lowe also wants to consider the merits of mining coal for independent power production. It is thought that the company is exploring this option with Sibanye Gold, a company that wants to de-risk its own energy supply by becoming an investor in a coal producer. As for the export market, Boikarabelo could be expanded to produce over 20mtpa in its second phase. This is based on studies by the company’s previous management. Probable reserves at Boikarabelo have been estimated at 744.8 million tonnes of coal on 35% of the tenements under the company’s control. GENERAL RATINGS PRESSURE ‘STILL REMAINS (Business Day, 9/5/2016) SA has escaped a ratings downgrade by Moody’s, but the agency has retained its negative outlook, putting pressure on the country to revive its economic growth rate and create a healthier climate for investment. The Moody’s decision, which comes after the rating agency put SA on review for a downgrade earlier this year, has been widely welcomed. But there is concern that Fitch and Standard & Poor’s (S&P) may downgrade SA to sub investment grade, or junk status, in their reviews due early next month. Deputy President Cyril Ramaphosa said the threat of a downgrade remained. "It is not over yet because there is another rating that is coming and this is when we must work harder and unite and demonstrate that SA is solid, it is stable, and that we are a worthy investment destination," he said. SA would "not escape" a downgrade from either Fitch or S&P next month, Argon Asset Management economist Thabi Leoka said on Sunday. Threats of a downgrade prompted closer collaboration between the government, business and labour earlier this year and working groups were set up to devise a series of initiatives to tackle persistently low growth and policy uncertainty. In an upbeat statement late on Friday, Moody’s left SA’s rating at Baa2 — which is two levels above speculative grade status — saying the country was "likely approaching a turning point after several years of falling growth". The budget and medium-term fiscal plan were likely to stabilise, and eventually reduce general government debt. Political developments, while disruptive, testified to the underlying strength of SA’s institutions, it said. Moody’s has always been the more upbeat of the three agencies on SA. Stanlib chief economist Kevin Lings said the Moody’s statement was extremely positive given recent economic and political events. "On reflection, Moody’s flagged very few negatives and their statement contrasts substantially with recent views expressed by both S&P and Fitch," Mr Lings said. A downgrade would tend to raise the cost of government borrowing, although economists estimate this has been priced in to some extent by the market. Moody’s said the negative outlook reflected risks associated with economic growth, the fiscal and political outlook, and the possibility that renewed volatility in global financial markets could increase external imbalances and disrupt growth. Deeper structural reforms to restore business confidence and raise the economy’s growth potential were in their very early stages, Moody’s said. Confidence concerns have been reiterated by business. CURRENCIES AND PRICES

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JSE AS AT 17:00PM 6 MAY 2016

All Share Index

6/05 51,417 - 0.99%

Industrials Index

6/05 42,663 - 1.04%

Financials Index

6/05 40,216 - 0.94%

Top 40 Index

6/05 45,102 - 1.14%

Industrial 25 Index

6/05 68,943 - 1.13%

Financial 15 Index

6/05 14,522 - 0.89%

Resources 10 Index

6/05 30,642 - 0.68%

Alt-X Index

6/05 1,511 + 0.06%

WORLD INDICATORS

FOREX

Rand/Dollar 06:06 14.8346 - 0.85%

Rand/Pound 06:35 21.3704

- 1.31%

Rand/Euro 06:35 16.9145 - 0.93%

COMMODITIES

Gold (usd/oz) 06:34 1,284.90 + 0.49%

Platinum (usd/oz) 06:34 1,069.00

+ 0.99%

Brent (usd/barrel) 06:30 45.97 + 2.13%

WORLD MARKETS

Wall St (DJIA) 6/05 17,741 + 0.45%

Germany (DAX) 6/05 9,870

+ 0.42%

Japan (Nikkei) 06:29 16,211 + 0.65%

3 month

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(Business Report, 9/5/2016)

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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 1226.00

95 ULP (c/l) 1194.00 1200.00 1131.00 1214.00 1226.00

Diesel 0.05% (c/l) 972.47 910.47 925.47 1015.47 1014.47

Diesel 0.005% (c/l) 977.87 914.87 928.87 1020.87 1018.87

Illuminating Paraffin (c/l) 594.028 535.028 552.028 608.028 601.028

Liquefied Petroleum Gas (c/kg)

1892.00 1893.00 1773.00 1883.00 1877.00

GAUTENG

93 LRP (c/l) 1209.00 1215.00 1146.00 1232.00 1244.00

93 ULP (c/l) 1209.00 1215.00 1146.00 1232.00 1244.00

95 ULP (c/l) 1237.00 1243.00 1174.00 1262.00 1274.00

Diesel 0.05% (c/l) 1005.17 943.17 958.17 1053.87 1052.87

Diesel 0.005% (c/l) 1010.57 947.57 961.57 1059.27 1057.27

Illuminating Paraffin (c/l) 647.028 588.028 605.028 662.628 655.628

Liquefied Petroleum Gas (c/kg)

2074.00 2075.00 1955.00 2065.00 2060.00

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

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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 6 May 2016

LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1540.00 1598.00 4809.50 1741.00 8950.00 17375.00 1864.50 1680.00

Cash Seller & Settlement 1550.00 1599.00 4810.00 1741.50 8960.00 17400.00 1865.50 1690.00

3-months Buyer 1570.00 1614.00 4792.00 1735.00 9010.00 17300.00 1870.00 1710.00

3-months Seller 1580.00 1614.50 4794.00 1737.00 9020.00 17305.00 1872.00 1720.00

15-months Buyer 17015.00

15-months Seller 17065.00

Dec 1 Buyer 1635.00 1655.00 4780.00 1750.00 9135.00 1863.00 1785.00

Dec 1 Seller 1645.00 1660.00 4790.00 1755.00 9235.00 1868.00 1795.00

Dec 2 Buyer 1693.00 4780.00 1758.00 9235.00 1837.00

Dec 2 Seller 1698.00 4790.00 1763.00 9335.00 1842.00

Dec 3 Buyer 1738.00 4785.00 1788.00 9320.00 1812.00

Dec 3 Seller 1743.00 4795.00 1793.00 9420.00 1817.00

(London Metal Exchange, 9/5/2016)

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