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COMMODITY NEWSBRIEFS: 6 MAY 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 BOOST IN EXPORTS TRIMS VEHICLE INDUSTRY’S TRADE DEFICIT (Business Day, 6/5/2015) Market recovery in European Union, SA’s biggest trading partner, fuels sales growth for cars and parts, writes David Furlonger A 13% surge in exports helped the South African motor industry slash its trade deficit by more than one-third last year. The deficit — the value gap between exports and imports — fell from R24bn in 2013 to R15.8bn. Having breached the R100bn export barrier for the first time in 2013, at R102.7bn, the industry shipped out R115.7bn in vehicles and components last year. A market recovery in the European Union (EU), the local industry’s biggest trading partner, was a major stimulus for growth. Imports also grew but only at 3.8%, from R126.7bn to R131.5bn. The main reason for the modest rate was the fall in local sales for the first time in five years. With imports accounting for two-thirds of new car sales in SA, a slowdown in foreign currency spending was inevitable. But it’s too early to crack open the champagne. Since the automotive production and development programme (APDP) replaced the 18-year-old motor industry development programme in 2013, a new Treasury formula for assessing trade values has slashed the deficit. Among changes, South African sales to Namibia, Botswana, Swaziland and Lesotho are now considered exports. Previously, they were deemed local because they are part of a customs union with SA. Under the old system, which also included after-market spare parts as imports, the 2013 figure would have been a record R63.8bn, reducing to R59.7bn last year. Nico Vermeulen, director of the National Association of Automobile Manufacturers of SA, says performance in 2013-2014 was "an aberration, a distortion". Prolonged strikes in both years slashed export earnings and encouraged imports to make up for local market shortages. Since the middle of last year, when MBSA’s East London plant returned to its full production capacity, total annual industry export growth "has been running at more than 20%", says Mr Vermeulen. After exporting almost 280,000 vehicles in both 2013 and 2014, the figure is expected to grow to 320,000 this year and 350,000 next year. SA enjoyed a trade surplus in built-up vehicles last year. More than half the cars and commercial vehicles built in SA are exported and in 2013, exports amounted to R70bn, against imports of R57.2bn — a surplus of R12.8bn. Components remained in the red: R74.3bn of imports and R45.7bn of exports, for a R28.6bn deficit. One of the APDP’s cornerstones is increased local content in SA-built vehicles, and reduced reliance on imported components. Many industry executives believe average industry local content should be more than 70%, rather than the sub-50% level, where it sits now. The government is set to announce the results of an APDP review and the industry hopes it will include ways to deepen local content, particularly tooling. Even then, there is no guarantee that the industry will ever wipe out its trade deficit.

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FAST MOVING CONSUMER GOODS AFRICA’S SUGAR PRODUCERS BRACE FOR EU QUOTA SCRAP (Cargo Info Africa, 6/5/2015) Africa’s sugar-producing countries will lose a significant portion of their export market in 2017 when the European Union (EU) Common Organisation of the Markets ends production quotas for its 19 members, reports TradeMark East Africa (TMEA). Currently, EU member states are limited to supply a maximum of 13.5 million tonnes of sugar, leaving the African, Caribbean and Pacific states (ACP) and least developed countries (LDCs) to supply up to 3.5 million tonnes through their quota-free, duty-free access to the EU market. As the world’s largest sugar consumer, the EU supports African sugar-producing and exporting countries such as Egypt, Mauritius, Zambia, Sudan, South Africa, Malawi, Zimbabwe, Lesotho, Mozambique, Ethiopia and Swaziland. These countries currently have duty free, quota free access to the EU for agricultural products, under the “Everything but Arms” regulation and the Economic Partnership Agreements, which end in 2017. The removal of quotas means that market segmentation (between the markets for quota sugar and non-quota sugar and other products derived from sugar beet) will end, and a single set of prices for sugar beet and processed sugar will apply. “With Brazil, Russia, India, China and South Africa having an important stock of sugar, they flooded the world market with their sugar, causing the price to fall. This represents a big danger for our industry, ahead of 2017,” Mauritian agro-industry and food security minister, Satish Faugoo, was quoted as saying. A recent study by the European Commission shows that the reform of the EU sugar regime could lead to a 4.2% increase in EU production of beet sugar, while imports of sugar are estimated to decline by 42.6%; mainly due to the replacement of imports from high-cost third countries, like the ACP countries, by domestic production. STEEL WEAK STEEL DEMAND FORCES AMSA TO RUN UPGRADED NEWCASTLE MILL BELOW CAPACITY (Engineering News, 6/5/2015) Steel producer ArcelorMittal South Africa (AMSA), which recently completed the R2-billion reline of the blast furnace at the Newcastle mill, has decided not to immediately ramp up the plant to its expanded 1.9-million-tonne-a-year nameplate capacity, owing to weak domestic market conditions. Speaking during a tour of the upgraded KwaZulu-Natal facility CEO Paul O'Flaherty said that, while the JSE-listed group’s ‘fill the mills’ strategy remained largely intact and was helping to lower costs, particularly at its Vanderbijlpark operation, it would be “financial suicide” for Newcastle to pursue the strategy in the current environment. He described the South African steel market as being under “severe pressure”, noting that, in the absence of import protection, the domestic market was currently heavily exposed to cheap imports, especially from China. AMSA estimated that imports comprised 40% of all steel consumed in South Africa during February. As a result the group had decided to hold Newcastle’s daily output at 4 300 t instead of operating it at its 5 200 t daily potential. But Newcastle GM Gerald Gadd stressed that the mill would require only between four and six weeks to move to full capacity should market conditions improve. Gadd also stressed the long-term nature of the investment into the mill, which he described as a major vote of confidence in both the operation and the Newcastle area, where the plant was a major economic and employment driver – the mill employs nearly 3 000 people directly and is a source of revenue for around 620 local companies. Echoing this view, O’Flaherty said that the investment was “an investment in the future” and had been pursued despite the difficult economic circumstances in which the country found itself. But in the absence of private infrastructure investment and the weak mining and manufacturing climate he argued that government needed to do more to raise infrastructure spending as outlined in the National Development Plan. AMSA had produced at a capacity utilisation in its guidance range of between 85% and 87% in the first quarter of 2015, but production levels were likely to taper during the second quarter to align output with the weak market and high stock levels. He also said that AMSA had no intention of making a bid for Highveld Steel & Vanadium, which recently entered business rescue. But he described the predicament of South Africa’s second largest steel producer as bad news for South Africa, for Highveld’s 3 000 workers and for the “depressed” Emalahleni area. Should the plant be forced to close or curtail production, AMSA would only be in a position to mop up some market share in overlapping product segments, while the balance of Highveld’s production would be lost to imports. The Mpumalanga-based mill had the potential to produce around 800 000 t/y of long and flat products, but had recently been producing at far lower levels.

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COAL PRODUCTION UP AT GLENCORE’S SOUTH AFRICAN COAL MINES (Mining Weekly, 6/5/2015) Production from Glencore’s South African thermal coal mines was 10% higher in the three months to end March. The London-, Hong Kong- and Johannesburg-listed diversified mining and marketing company, headed by CEO Ivan Glasenberg, said on Tuesday that the ramp-up of its newly commissioned Tweefontein Optimisation and Wonderfontein thermal coal projects in Mpumalanga had more than offset the closure of certain high cost operations, taking total first-quarter output to a 10%-higher 11.4-million tonnes. The R8.213-billion Tweefontein Optimisation, which came in on time and under budget, has delivered a low-cost, long-life brownfield expansion that has elevated the operation near Ogies into a modern, predominantly opencast operation that mines the rich pillar reserves left behind in discontinued underground workings. Overall company coal production was 35.6-million tonnes, 4% higher than the comparable period due to higher South African production. The announced potential production cuts in South Africa at Optimum Coal are expected to possibly impact later this year. Also in South Africa, Glencore’s attributable ferrochrome production was up 15% to 385 000 t, driven by its Lion II expansion project near Steelpoort in Limpopo province. The Lion ferrochrome smelter, owned and operated by the Glencore Merafe Chrome Venture, uses 37% less electricity than conventional ferrochrome processes and considerably less coking coal to produce the equivalent volume of ferrochrome. Had the Lion operation not installed the Premus technology, it would have needed an additional 1 776 MWh to produce the same volume of ferrochrome. GRAIN ZIMBABWE TO IMPORT 700 000 T OF MAIZE AFTER POOR HARVEST (Engineering News, 6/5/2015) Zimbabwe plans to import 700 000 t of the staple maize grain to plug a deficit after bad weather affected the crop from the current farming season, State radio reported on Tuesday. It quoted Agriculture Minister Joseph Made as saying Zimbabwe had 150 000 t of maize in stock and was looking to import to make up for the shortfall. Zimbabwe requires at least 1.8-million tonnes of maize annually and has over the years relied on imports from neighbouring countries, including Zambia and South Africa, to plug the gap from local production. Domestic output is expected to drop by 35% to 950 000 t this year compared with 2014, the United Nations Food and Agriculture Organisation has said. Earlier this year the government, anticipating a low maize harvest, lifted a ban on imports it had imposed last year. Agriculture contributes 17% to Zimbabwe's gross domestic product and the decline in maize production is expected to impact on growth, which the government has forecast at 3.2% for 2015. CHROME & MANGANESE See article “PRODUCTION UP AT GLENCORE’S SOUTH AFRICAN COAL MINES” under heading COAL NON-FERROUS METALS GLENCORE MULLS CLOSING SOME SA OPERATIONS (News24, 6/5/2015) Glencore, the mining and commodities company led by billionaire Ivan Glasenberg, reported a 9% decline in copper production after ore grades fell and a Chilean mine shut for maintenance. Output of copper from mines in Africa, Australia and South America was 350 700 metric tonnes in the first quarter, the Baar, Switzerland-based company said Tuesday in a statement. That compared with 385 600 tonnes a year earlier. Ore grades declined at the Alumbrera mine in Argentina and the Antamina mine in Peru, while planned work at the Collahuasi operation in Chile also reduced volumes of the metal used in pipes and wires. Glencore, the world’s biggest exporter of power-station coal, said output of the commodity increased 4% to 35.6 million tonnes. The company has said it will trim Australian production by 15 million tonnes this year and is considering shutting operations in South Africa after prices slumped to near the lowest since 2007. Production of zinc rose 16% to 356 200 tonnes, lead decreased 4% to 75 800 tonnes and nickel gained 7% to 23 800 tonnes.

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GENERAL INTEREST RATE HIKE EXPECTED BY END OF THE YEAR, SAYS ABSA’S DU TOIT (Engineering News, 6/5/2015) Banking group Absa’s forecast was for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, said Absa sectoral analyst Jacques du Toit on Tuesday. Speaking at a Ford Motor Company breakfast in Pretoria, he warned that possible interest rate hikes in the US could see capital being pulled from emerging markets, increasing the currency volatility in these markets further. He expected the anticipated weakening of the rand to have a wide-ranging impact, pushing up “food prices to vehicle prices”. The oil price was also again gaining ground. Du Toit expected inflation to average 5.5% in 2015, meaning it would accelerate from February’s 3.9% to around 7% by the end of the year. This rapid increase was expected to place pressure on wage negotiations. Interest rates would probably see an increase of 25 basis points by the end of the year, said Du Toit. “Next year the forecast was for another three 25 basis-point increases.” CURRENCIES AND PRICES

ALSI: 3 mnth to 5 May 15

(Mail & Guardian, 6/5/2015)

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JSE AS AT 17:00PM 5 MAY 2015

All Share Index 5/05 54,575

- 64.87 - 0.12%

Industrials Index 5/05 47,153

+ 585.39 + 1.26%

Financials Index 5/05 46,203

- 43.49 - 0.09%

Top 40 Index 5/05 48,312

- 130.80 - 0.27%

Industrial 25 Index 5/05 68,025

- 489.55 - 0.71%

Financial 15 Index 5/05 17,595

- 23.81 - 0.14%

Resources 10 Index 5/05 46,140

+ 620.81 + 1.36%

Alt-X Index 5/05 1,331

+ 7.63 + 0.58%

WORLD INDICATORS

FOREX

Rand/Dollar 06:18 11.9673

- 0.08 - 0.70%

Rand/Pound

06:20 18.1508

- 0.05 - 0.30%

Rand/Euro 06:20 13.4237

- 0.02 - 0.15%

COMMODITIES

Gold (usd/oz) 06:15 1,195.41

+ 6.61 + 0.56%

Platinum (usd/oz)

06:15 1,147.88

- 8.12 - 0.70%

Brent (usd/barrel) 06:18 68.46

+ 2.01 + 3.02%

WORLD MARKETS

Wall St (DJIA) 5/05 17,929

- 141.13 - 0.78%

Germany (DAX)

5/05 11,328

- 126.70 - 1.11%

Japan (Nikkei) 1/05 19,532

+ 11.62 + 0.06%

(Business Report, 6/5/2015) COPPER A – SETTLEMENT PRICE – N/A FORWARD RATES - Dollar/rand 4pm close: N/A

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(TFR Commercial Management: Business Performance Dept)

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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

95 ULP (c/l) 1083.00 990.00 1086.00 1246.00

Diesel 0.05% (c/l) 997.49 895.49 969.49 1090.09

Diesel 0.005% (c/l) 1001.89 899.89 973.89 1096.49

Illuminating Paraffin (c/l) 697.728 595.728 668.728 690.828

Liquefied Petroleum Gas

(c/kg) 1829.00 1679.00 1833.00 1918.00

GAUTENG

93 LRP (c/l) 1102.00 1009.00 1105.00 1261.00

93 ULP (c/l) 1102.00 1009.00 1105.00 1261.00

95 ULP (c/l) 1124.00 1031.00 1127.00 1289.00

Diesel 0.05% (c/l) 1028.09 926.09 1000.09 1122.79

Diesel 0.005% (c/l) 1032.49 930.49 1004.49 1129.19

Illuminating Paraffin (c/l) 747.928 645.928 718.928 743.828

Liquefied Petroleum Gas

(c/kg) 2011.00 1861.00 2015.00 2100.00

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

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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 5 May 2015

LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1800.00 1910.00 6405.00 2139.00 14125.00 16005.00 2398.00 1845.00

Cash Seller & Settlement 1810.00 1910.50 6410.00 2140.00 14130.00 16010.00 2400.00 1845.50

3-months Buyer 1800.00 1925.00 6407.00 2136.50 14170.00 16025.00 2370.00 1895.00

3-months Seller 1810.00 1926.00 6408.00 2137.00 14180.00 16050.00 2370.50 1900.00

15-months Buyer 16145.00

15-months Seller 16195.00

Dec 1 Buyer 1800.00 1993.00 6400.00 2152.00 14315.00 2368.00 1970.00

Dec 1 Seller 1810.00 1998.00 6410.00 2157.00 14415.00 2373.00 1980.00

Dec 2 Buyer 2048.00 6400.00 2170.00 14405.00 2353.00

Dec 2 Seller 2053.00 6410.00 2175.00 14505.00 2358.00

Dec 3 Buyer 2098.00 6400.00 2175.00 14430.00 2340.00

Dec 3 Seller 2103.00 6410.00 2180.00 14530.00 2345.00

(London Metal Exchange, 6/5/2015)

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