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COMMODITY NEWSBRIEFS: 21 SEPTEMBER 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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FAST MOVING CONSUMER GOODS ILLOVO EARNINGS TO SLUMP (Business Report, 21/9/2015) Illovo Sugar warned on Friday it expected a decline of as much as 85 percent in earnings per share for the six months to the end of September. Africa’s biggest sugar producer said headline earnings per share were expected to come in at between 68.4 cents and 85.5 cents, down from 171.1 in the prior corresponding period. This is as it continued to struggle against the unhealthy combination of unfavourable weather conditions in South Africa, currency headwinds and low export sugar prices. A steeper decline in earnings per share for the half year – of between 75 and 85 percent to between 42.8 cents and 25.7 cents – was the result of the decision to write-off the cost of development and registration of a chemical pesticide because of difficulties of getting approval from the US Environmental Protection Agency for use on food crops. INTERMODAL See article “BALTIC DRY INDEX JUMPS MOST SINCE '09 ON SPECULATED SHIP SHORTAGE” under heading IRON IRON BALTIC DRY INDEX JUMPS MOST SINCE '09 ON SPECULATED SHIP SHORTAGE (Mining, 21/9/2015) Another ray of sunshine appeared late last week for the iron ore price, which has been climbing in recent days on hopes for a revival of Chinese infrastructure spending. The Sydney Morning Herald reported on Saturday that the Baltic Dry Index – a measure of shipping costs for commodities – had its biggest two-day gain since 2009, over speculation that Chinese iron ore purchasing will cause a shortage of vessels, thereby increasing freight rates. The London-based index rose 18 percent, with costs for capesize vessels that transport iron ore from Brazil to China, climbing 16 percent. "There's a misunderstanding among investors that China isn't buying iron ore: it is," Jeffrey Landsberg, the managing director of Commodore Research in New York, told SMH. "China is still buying every single ton that global miners want to sell." Shipping costs have been in a slump this year as shipbrokers predict too many vessels chasing too few cargoes due to slowing economic growth in the world's biggest commodities consumer. Meanwhile the steelmaking ingredient rose for the second straight day on Monday, with benchmark iron ore for immediate delivery to the port of Tianjin, China trading at US$57.10 a tonne. Iron ore hit a 10-week high on September 10, trading at $58.50 a tonne, 30-percent above record lows for the spot market reached on July 8.

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See article “SOUTH AFRICAN COMMODITY EXPORTERS BRAVE BLOODBATH TO PROTECT MARKET” under heading TRANSNET FUEL COEGA DEVELOPMENT CORPORATION EYES SECOND GAS-TO-POWER PROJECT (Engineering News, 21/9/2015) The Coega Development Corporation (CDC) has received an overwhelming number of responses from key local and international industry players after issuing a tender notice in August for an environmental-impact assessment (EIA) for a gas-to-power facility in the Coega industrial development zone (IDZ), in the Eastern Cape . The proposed gas-to-power plant would be the second power plant in the Coega IDZ after the Dedisa peaking power plant – a R3.5-billion, liquid fuel open-cycle gas turbine with a 342 MW generation capacity. “The proposed facility will be conveniently situated less than 4 km from the 400 kV Dedisa substation, which will significantly reduce costs for taxpayers and authorities,” noted CDC energy manager Sandisiwe Ncemane in a statement on Thursday. The CDC emphasised that energy development from gas in South Africa was entering a ‘golden age,’ and gaining significant momentum, adding that energy development from gas was especially important as it would assist the country in meeting baseload energy needs between 2020 and 2030. Ncemane said the upside for gas to power projects was their relatively shorter gestation period. State-owned entity Transnet’s port development plans include the LNG terminal at the Port of Ngqura, in the Eastern Cape, identifying several berth options for its deep-water seaport, which is adjacent to the Coega IDZ. The CDC had approved the Coega Infrastructure Master Plan – a defined services corridor from project site to the Dedisa substation and good access to site through the N2 and ancillary road network. SA, IRAN TO MEET OVER OIL IMPORTS (iAfrica, 21/9/2015) South African oil companies and Iranian officials are set to meet next month to discuss resuming oil imports. Deputy Energy Minister Thembisile Majola said that South Africa was planning on building a crude oil refinery and that Iranian crude oil would be refined there to add to the existing liquid-to-gas plant in Mossel Bay. Iran was South Africa's biggest oil supplier before Western sanctions halted the supply. The West has recently agreed to lift the sanctions against Iran and the actual implementation of the agreement could happen early next year. "There is a visit that has already been scheduled for them to come to South Africa in October and they will get the opportunity to speak to the oil companies," Majola told Reuters. The minister added that PetroSA had agreed to help Iran build a gas-to-liquid refinery. COAL See article “SOUTH AFRICAN COMMODITY EXPORTERS BRAVE BLOODBATH TO PROTECT MARKET” under heading TRANSNET TIMBER, PAPER, PUBLISHING SAPPI CAPITALISES ON WEAK RAND (Business Report, 21/9/2015) Sappi said the rand’s decline against the dollar is boosting the earnings of the pulp and paper maker as its exports gain in value, one of the first South African companies to report a positive impact from the currency’s weakness. Sappi is the world’s biggest producer of dissolving wood pulp, a cotton substitute used in textiles including lingerie and golf shirts, for export from South African mills. The rand’s depreciation is helping to grow the product’s already-attractive profit margins when compared with the company’s graphic paper, Chief Executive Officer Steve Binnie, 48, said in an interview on Wednesday at Bloomberg’s Johannesburg office. “There’s products selling for over $800 a ton in China, and we can manufacture it for $500 - it’s really lucrative for us,” he said. “With the rand weakening it’s just strengthening our position.” The South African rand has slumped 16 percent against the US currency this year as commodity prices fall and demand weakens in China, a key export market for miners. South Africa is the world’s largest producer of platinum and also exports gold, coal, iron ore and chrome. Sappi’s competitors in countries such as Brazil are also benefiting from a rising value of exports, as emerging-market currencies weaken across the world. Sappi’s operations in its home country, which include paper and packaging manufacturing as well as pulp, contribute about half of the company’s earnings before interest, taxes, depreciation and amortisation, Binnie said. The Johannesburg-based company also has operations in Europe and North America. A weaker euro has made exports from its European operations to Asia more profitable, the executive said. Some of the country’s other

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exporters, particularly the miners, have struggled to benefit from the domestic currency’s weakness as sluggish demand for commodities and manufactured goods in key markets such as China and Europe weigh on pricing and sales. CHROME & MANGANESE See article “SOUTH AFRICAN COMMODITY EXPORTERS BRAVE BLOODBATH TO PROTECT MARKET” under heading TRANSNET MINERAL MINING MINING’S LONG-TERM OUTLOOK POSITIVE AS URBANISATION AND INFRASTRUCTURE DEVELOPMENT INTENSIFIES (Mining Weekly, 21/9/2015) The outlook for the global economy, infrastructure development and mining is not as dismal as many might believe, Deloitte global mining leader Phil Hopwood recently told an audience at the Canada-South Africa Chamber of Commerce’s seminar on infrastructure in Southern Africa. “People talk about doom and gloom, but it isn’t all that doomy or gloomy. We can talk ourselves into corners by saying things are pretty bad,” he cautioned. “I’d say that you’ve got to focus on the long-term fundamentals and I am optimistic.” Despite the volatile global economy, the positive drivers for metals and mineral consumption had remained in place over the long term, particularly based on developing economies that had growing rates of urbanisation. China was important in this regard, although Hopwood also highlighted countries such as India, Indonesia, Mexico and Brazil and the volume of commodities these nations would require to build out their infrastructure on growing urbanisation rates. Countries such as Saudi Arabia were also noteworthy, achieving higher rates of urbanisation and developing large projects, including smelters. By 2030, it was estimated that 9% of the world’s population would live in 41 megacities, while the level of global urbanisation was expected to reach 66% by 2050, according to the United Nations. “I’m always wary when seeing things that go out to 2050, but there’s no doubt we have a gigantic population move into urban centres. That’s a good thing for commodities and demand stemming from urbanisation,” Hopwood added. Deloitte tracked issues that mining companies considered the most important for the year ahead. The top five included returning to basics, with operational performance a central factor; innovation; reducing power costs; finding the right balance for project pipelines and tackling the implications of tight financing and its broader effect across the market. NON-FERROUS METALS GLENCORE INVENTORY SALE COULD SINK WORLD ZINC PRICES FURTHER (Mining Weekly, 21/9/2015) Substantial amounts of base metal zinc could be released onto world markets, weighing further on fast falling prices, as major producer Glencore implements a plan to liquidate some of its commodity inventories to help pay off debt. The overhang of inventories in London Metal Exchange (LME) storage facilities, which has surged more than 40% since early August, has wrong-footed investors who had earlier this year targeted zinc as a top bet in metals due to closures of big mines that would create shortages. Zinc, mainly used to galvanize steel to protect against rust in autos and construction, has slumped from being one of the best performing industrial metals earlier in the year to one of the worst due to the inventory change. "It's been a big shock to the market, this massive flood into the LME warehouses," said Stephen Briggs, metals strategist at BNP Paribas. But mining and trading company Glencore may add further to a plentiful supply situation after announcing a raft of measures to slash its net debt of $30-billion. At interim results last month, Glencore said it was cutting "readily marketable inventories" by $1.5-billion. Last week it said it was further reducing working capital by an additional $1.5-billion, partly from liquidating more inventories. LME zinc inventories have surged 43% to 608 885 t since August 7, with the bulk of metal arriving at warehouses in New Orleans. Glencore's warehousing unit, Pacorini Metals, dominates activity in New Orleans, owning nearly two-thirds of the 42 depots in the city. Benchmark zinc on the London Metal Exchange jumped to an eight-month peak of $2 404.50/t in May, but has since slid nearly 30% to $1 740. TRANSNET TRANSNET’S AFRICA PLAN ‘MASKS LOCAL FAILINGS’ (Business Day, 21/9/2015) Transnet’s plan to increase its international revenue could benefit the company, under pressure from low commodity prices, but it cannot be used to mask its local weaknesses, analysts say. Transnet acting CEO Siyabonga Gama said last week that

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the state-owned freight and logistics company intended to increase its revenue from international business to 25% by 2025 from 4.2% currently. Most of this would be from business on the continent and opportunities in the Middle East. Transnet Engineering would become an original equipment manufacturer of locomotives, coaches and wagons, a decision central to increasing its international footprint. The company said it was also pursuing opportunities to operate ports on the continent. It is establishing Transnet International Holdings as a vehicle to seek opportunities outside SA. University of Johannesburg department of transport and supply chain management head Prof Jackie Walters said Transnet’s plans to increase its international revenue would be beneficial, as SA’s economy was not “functioning optimally” and the drop in commodity prices resulted in a loss of tonnage. But transport economist Andrew Marsay said Transnet was not “intrinsically viable” and should be more honest about this. The company should focus on restructuring itself to become viable in SA, rather than looking abroad for solutions, he said. Transnet’s general freight business did not fully cover its costs and was subsidised by other business units such as the ports, Mr Marsay added. “Transnet has high profits on the ports because it has very high charges. It is using the ports to secure loans. The things that Transnet spends this money on are mostly not viable,” he said. Transnet should also examine how it could better serve the South African economy, Mr Marsay said. Prof Walters said it was a “known fact” that SA’s ports were expensive. Transnet’s general freight business did not have huge volumes and it was lossmaking and cross-funded by the company’s pipelines and ports. SOUTH AFRICAN COMMODITY EXPORTERS BRAVE BLOODBATH TO PROTECT MARKET (Mineweb, 21/9/2015) South African miners are largely maintaining export volumes of commodities including coal and iron ore despite a pricing bloodbath in those markets, according to the head of the state-owned freight-rail and ports operator. Transnet expects to move about 75 million metric tons of export coal and 60 million tons of iron ore on its railways in its financial year through March 31, Acting Chief Executive Officer Siyabonga Gama said. That’s largely unchanged from 76.3 million tons and 59.7 million tons in fiscal 2015. Miners have indicated they’re concerned about losing market share if output slows, Gama said. “There is a bloodbath in the commodities market, but the extent to which we have experienced it, it is much less than what we thought might actually happen,” Gama said in an interview last week at Bloomberg’s Johannesburg office. “When I talk to the customers, some of them feel very strongly that if they responded to the market they would be squeezed out completely.” The company had budgeted for export coal volumes of 77 million tons and 62 million tons of iron ore in the current financial year, Gama told reporters in July. Transnet is implementing a rolling seven-year, 336 billion- rand ($25 billion) plan to expand and upgrade rail and port capacity in South Africa, the world’s biggest manganese producer and the continent’s largest of iron ore and coal. The project aims to reduce bottlenecks and shift freight from roads to rail in the country where Anglo American, Glencore and South32 have operations. While the rail operator remains committed to completing its investment plans, some projects may take longer than previously expected because of the decline in commodity markets, Gama said. Iron-ore prices have fallen 19% this year and are 70% below a 2011 high of $191.70 a ton because of rising low-cost output and weaker growth in China, the biggest buyer. The price of coal at Richards Bay on South Africa’s Indian Ocean coast has declined 15% as the Asian nation, which is the largest user of the fuel, turns to cleaner alternatives. While some projects may take longer, Transnet’s moving ahead with developing a manganese terminal, which will begin operations in 2019 and have annual capacity of 16 million tons, Gama said. The company said last year the project would cost R27 billion. The company will probably start work early next year on a new rail tunnel on the Richards Bay coal line, about 30 kilometers (19 miles) southeast of the town of Ermelo in the coal-rich Mpumalanga province. While some projects may take longer, Transnet’s moving ahead with developing a manganese terminal, which will begin operations in 2019 and have annual capacity of 16 million tons, Gama said. The company said last year the project would cost R27 billion. The company will probably start work early next year on a new rail tunnel on the Richards Bay coal line, about 30 kilometers (19 miles) southeast of the town of Ermelo in the coal-rich Mpumalanga province. CURRENCIES AND PRICES

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ALSI: 3 mnth to 18 Sep 15

(Mail & Guardian, 21/9/2015)

JSE AS AT 17:14PM 18 SEPTEMBER 2015

All Share Index 18/09 51,045

- 528.99 - 1.03%

Industrials Index 18/09 43,314

- 826.93 - 1.87%

Financials Index 18/09 43,528

- 328.60 - 0.75%

Top 40 Index 18/09 45,616

- 521.46 - 1.13%

Industrial 25 Index 18/09 66,854

- 858.79 - 1.27%

Financial 15 Index 18/09 16,258

- 160.61 - 0.98%

Resources 10 Index 18/09 35,972

- 219.34 - 0.61%

Alt-X Index 18/09 1,487

+ 1.21 + 0.08%

WORLD INDICATORS

FOREX

Rand/Dollar 06:30 13.3456

+ 0.008 + 0.06%

Rand/Pound

06:30 20.7019

- 0.05 - 0.26%

Rand/Euro 06:30 15.1030

- 0.13 - 0.83%

COMMODITIES

Gold (usd/oz) 06:30 1,137.69

+ 5.69 + 0.50%

Platinum (usd/oz)

06:27 979.25

+ 0.15 + 0.02%

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Brent (usd/barrel) 06:21 47.84

- 1.24 - 2.53%

WORLD MARKETS

Wall St (DJIA) 18/09 16,385

- 290.16 - 1.74%

Germany (DAX)

18/09 9,916

- 311.05 - 3.04%

Japan (Nikkei) 18/09 18,070

- 362.06 - 1.96%

(Business Report, 21/9/2015)

(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 1246.00 1293.00 1334.00 1283.00 1214.00

95 ULP (c/l) 1083.00 990.00 1086.00 1246.00 1246.00 1293.00 1334.00 1283.00 1214.00

Diesel 0.05% (c/l) 997.49 895.49 969.49 1090.09 1085.09 1134.09 1138.09 1062.27 1008.27

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

Illuminating Paraffin (c/l) 697.728 595.728 668.728 690.828 685.828 727.828 733.828 663.828 608.828

Liquefied Petroleum Gas

(c/kg) 1829.00 1679.00 1833.00 1918.00 1935.00 2035.00 2091.00 2002.00 1887.00

GAUTENG

93 LRP (c/l) 1102.00 1009.00 1105.00 1261.00 1261.00 1308.00 1352.00 1301.00 1232.00

93 ULP (c/l) 1102.00 1009.00 1105.00 1261.00 1261.00 1308.00 1352.00 1301.00 1232.00

95 ULP (c/l) 1124.00 1031.00 1127.00 1289.00 1289.00 1336.00 1377.00 1326.00 1257.00

Diesel 0.05% (c/l) 1028.09 926.09 1000.09 1122.79 1117.79 1166.79 1170.79 1094.97 1040.97

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

Illuminating Paraffin (c/l) 747.928 645.928 718.928 743.828 738.828 780.828 786.828 716.828 661.828

Liquefied Petroleum Gas

(c/kg) 2011.00 1861.00 2015.00 2100.00 2117.00 2217.00 2273.00 2184.00 2069.00

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

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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 18 September 2015

LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1695.00 1624.00 5357.00 1689.00 9750.00 15000.00 1697.50 1690.00

Cash Seller & Settlement 1705.00 1624.50 5358.00 1690.00 9760.00 15050.00 1698.00 1692.00

3-months Buyer 1710.00 1635.00 5348.00 1705.00 9790.00 15000.00 1716.00 1705.00

3-months Seller 1720.00 1636.00 5349.00 1707.00 9800.00 15100.00 1716.50 1715.00

15-months Buyer 14895.00

15-months Seller 14945.00

Dec 3 Buyer 1827.00 5320.00 1778.00 9900.00 1788.00

Dec 3 Seller 1832.00 5330.00 1783.00 10000.00 1793.00

(London Metal Exchange, 21/9/2015)

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