COMMODITY NEWSBRIEFS: 21 FEBRUARY

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1 COMMODITY NEWSBRIEFS: 21 FEBRUARY 20 Please note that these articles are available in electronic format and can be requested and delivered via . ( DISCLAIMER The information contained in this publication is for general information purposes only. The information is provided by Transnet Freight Rail, a division of Transnet Limited, and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the publication, or the information, products, services, or related graphics contained in the publication for any purpose. Any reliance you place on such information is therefore strictly at your own risk. In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of profits arising out of, or in connection with, the use of this publication. This publication may refer to other publications which are not under the control of Transnet Freight Rail. We have no control over the nature, content and availability of those other publications. The inclusion of any other publications or other website links does not imply a recommendation or endorse the views expressed within them. Every effort is made to keep the content of the publication correct and complete. However, Transnet Freight Rail takes no responsibility for, and will not be liable for information in the publication being incorrect or incomplete. Transnet Freight Rail also does not guarantee the availability of the publication at any specific intervals IRON KUMBA 'SECOND FOOTPRINT' LENDS OPTION TO SA (MiningMx, 21/2/20) It s certain that the South African government wants to legislate cheap domestic coal to Eskom in order to control electricity prices. There are similar external pressures building in the domestic iron ore industry that reference Government s interest in building viable downstream steel industries; perhaps even a steel mill at Coega. Whereas the government intends to declare coal a strategic mineral, and thereby partially regulate domestic supply, it s less clear what it has in mind for local iron ore supply. Proposed amendments to the Minerals and Petroleum Resources Development Act (MPRDA) provide the government with greater power to impose a pricing regime over certain metals. Mbazima knows export parity pricing for a portion of Kumba s domestic supply is unacceptable to the government. Similarly, anything less than a double-digit return and covering the cost of capital would be unacceptable to Kumba especially where it is allocating fresh capital. Quite simply, Kumba can divert capital from South Africa to other parts of the globe. Enter Kumba s so-called second footprint. This is Kumba s West Africa exploration strategy. At the moment, Mbazima has underplayed the prospectivity of digging Africa for new sources of iron ore. Mbazima says iron ore that would have been supplied to Amsa s Newcastle Works can easily find a home in the export markets despite the fact the steel market has been slowing since Steel production growth was only 2% in 20, down from 7% growth in Meanwhile, there s a prospect that Kumba s new iron ore mine Phoenix - which is planned to replace production from the nearly mined out Thabazimbi mine, could be delayed. The reason is another legal match-up between Kumba and Amsa in which Amsa is claiming the right to supply from Phoenix. This is despite withdrawing from the project in The matter is with the lawyers. BEWARE THE COMING IRON ORE SUPPLY FLOOD (Mining, 21/2/20) Iron ore is trading more than 80% higher than six months ago when the commodity hit a 3-year low of $87.50 a tonne. Some analysts point to a possible $170 a tonne by mid-year, but longer term the price may be heading south again as demand struggle to keep pace with massive new supply coming on stream over the next few years. A new report shows the total production capacity of 66 Chinese iron ore projects under construction comes to a whopping million additional tonnes by The industry's Big 4 producers Vale, Fortescue Metals Group, BHP Billiton) and Rio Tinto are also ramping up production. Anglo American's Rio Minas project in Brazil will add more than 26 million tonnes within two years and its Kumba subsidiary new Kolomela mine is exceeding targets with 8.5 million tonne output. The company's flagship Sishen mine should also recover to full capacity following a decline in output to 34 million tonnes last year due to strikes. India s Transnet Freight Rail News Briefs Page 1 of 8

2 disappearance as an iron ore exporter it shipped some 0 million tonnes abroad in 2009, but only a fraction of that last year has certainly helped the iron ore price stay at lofty levels. STEEL GLOBAL STEEL OUTPUT UP 0.8% Y/Y IN JANUARY (Engineering News, 21/2/20) Global crude steel production increased by 0.8% year-on-year to 5-million tons in January, the World Steel Association revealed on Wednesday. China s crude steel output for January amounted to 59.3-million tons, up 4.6% compared with January 20. Japan produced 8.9-million tons of crude steel in January, an increase of 2.7% compared with the same month last year. South Korea s crude steel production, however, fell by 0.4% year-on-year to 5.8-million tons. In the EU, Germany produced 3.6-million tons of crude steel, 5.4% higher than January 20 output, while Italy s crude steel output fell 19.7% year-on-year to 1.8-million tons. France s crude steel production was 1.4-million tons, 1.3% lower than in January 20, while Spain experienced a 2.5% year-on-year decline in output to 1.1-million tons. Meanwhile, Russia produced 5.7- million tons of crude steel, a decrease of 5.7% compared with the same month last year. US steel production also fell by 5.8% year-on-year to 7.3-million tons. (Whole article) MINERAL MINING BHP INTERIM PROFIT SLUMPS 58% (Mining Weekly, 21/2/20) The world s largest diversified miner BHP Billiton on Wednesday reported that its profit for the interim period to December was down some 57.8% compared with the previous corresponding period, to $4.2-billion. The miner, which on Wednesday also lost its CEO, reported that the December half of 20 was challenging for the global resources industry, as substantially lower commodity prices and resilient producer currencies weighed on margins and profitability. Underlying earnings before interest and tax (Ebit) declined by 38% during the period under review, to $9.8-billion, while attributable profit decreased by 43% to $5.7-billion. Revenue for the period was down 14.1% to $32.2-billion. BHP noted that the external influence of lower commodity prices, a weak US dollar and inflation reduced underlying Ebit by a cumulative $6.2-billion, and more than offset the contribution from stronger volumes and operating cost savings. However, the miner said that, despite the challenging market environment, the group s underlying Ebit remained in excess of 30%, while underlying return on capital was at 18%. Meanwhile, during the half-year under review, BHP also realised some $4.3-billion from asset sales, which was consistent with its ongoing commitment to simplify the portfolio over time. The miner said it would continue to selectively pursue asset divestment opportunities, with a firm focus on value. Looking ahead, BHP expected a general improvement in the global economy in the short term to support demand and prices for a number of its commodities. However, the miner noted that the addition of low-cost supply in several markets was expected to dampen the pricing upside. TRANSNET INFRASTRUCTURE PLAN SHOULD NOT BE IMPACTED BY SLOWDOWN (Engineering News, 21/2/20) South Africa's massive infrastructure plan should not be allowed to be impacted upon by the global economic slowdown or derailed by a lack of funding, Public Enterprises Minister Malusi Gigaba said on Tuesday. In the last year, the Presidential Infrastructure Coordinating Commission has launched the intergovernmental forums of the 18 Strategic Infrastructure Projects known as SIPs. Addressing parliamentarians, Gigaba gave an update of some of the projects in the infrastructure plan. The infrastructure project aimed at unlocking the Northern Mineral Belt with the Waterberg as the catalyst, has to date shown that despite recent labour unrest challenges, Eskom s Medupi power plant was 58% complete. A total R60.4-billion has been spent to date and a total of jobs created. The project focused on the Durban-Free State-Gauteng logistics and industrial corridor has shown that the new multi-product fuel pipeline is on schedule, with spending on this project to date being at R16.9 billion with jobs created. The procurement of rolling stock for general freight is at 73% completion, with a total spend-to-date of R2.7-billion and 159 jobs created. Gigaba said that 54% local content on the manufacturing of locomotives has been secured, which will strengthen Transnet Engineering s manufacturing capabilities and contribute to job creation and skills development, among others. Additionally, a feasibility study and environmental impact assessment on the Durban Port Terminal s Pier 1 upgrade will be completed in 2014 and R70-million has to date been spent on this project. Transnet Freight Rail News Briefs Page 2 of 8

3 GENERAL SA JANUARY INFLATION SLOWS TO 5.4% Y/Y (Engineering News, 21/2/20) South Africa's headline consumer inflation slowed to 5.4% year-on-year in January, well below the market's expectations, from 5.7% in December, Statistics South Africa said on Wednesday. Inflation was at 0.3% on a month-on-month basis in January compared with 0.2% in December, lower than market consensus of 0.55%. Economists had expected inflation to come in at 5.7% year-on-year in January. The release is the first one under a rebasing from a 2010/11 household spending survey. (Whole article) NUMSA, MANUEL: ESKOM HIKES 'UNACCEPTABLE' (News24, 21/2/20) Numsa agreed on Wednesday with Minister in the Presidency Trevor Manuel s pronouncements that the proposed electricity hikes "were unacceptable". "We welcome Minister Manuel s firm stance on this ridiculous request by Eskom," the National Union of Metalworkers of SA (Numsa) said in a statement. Manuel warned against energy tariff increases during a briefing on the National Development Plan in Cape Town on Tuesday. He said rapid increases in administered prices, including energy, had to be guarded against. Numsa said the National Energy Regulator of SA should grant Eskom a "single digit, inflationrelated increase" for a period of three years. Nersa held public hearings into the proposed tariff increases earlier this month. Eskom has asked for a 16% increase in electricity prices for each of the next five years. CURRENCIES AND PRICES MARKETS AND INDICATORS JSE Alsi 20/02 40, % Financials 20/02 30, % Industrials 20/02 39, % FOREX Rand/Dollar 06: % Rand/Pound 06: % Rand/Euro 06: % COMMODITIES Gold (usd/oz) 06:37 1, % Platinum (usd/oz) 06:37 1, % Brent (usd/barrel) 06: % World Markets Wall St (DJIA) 20/02, % Germany (DAX) 20/02 7, % Japan (Nikkei) 06:32 11, % (Business Report, 21/2/20) Transnet Freight Rail News Briefs Page 3 of 8

4 (Business Report, 21/2/20) COPPER A SETTLEMENT PRICE 8009, 5 FORWARD RATES - Dollar/rand 4pm close: R8, 8538 Transnet Freight Rail News Briefs Page 4 of 8

5 Commodity Price Report UPDATED 07-Feb- Current (Spot) Commodity Prices Nov- Dec- Jan- Q Q Q Q3 20 Q Manganese ore = (Mn 48-50% fob $/mtu) Iron Ore China Fines cfr main China port USD/dry metric tonne ( 63.5% grade) Coal:Steam (FOR) Local = R/ton (= October 20) (e) (e) (e) (e) (e) (e) Bituminous =R236.00, Coking coal = R Anthracite = R / ton OCT ) Export = $/ton FOB R/Bay Chrome ore SA lumpy % $/ton cif chinese port Ferrochrome 52 % = European (US$/lb) Stainless Steel FOB NE $/Tonne Wheat (WEATN) R/TON White Maize (WMAZN) R/TON Yellow Maize (YMAZN) R/TON Diesel - Gauteng (R/L) Litre Petrol 95 ULP - Gauteng(R/L) Litre Oil Brent Crude ($/Barrel) Litre Steel: HR coil (US $/ton) CR coil (US $/ton) HR coil (EU /ton) CR coil (EU /ton) Economic Indicators CPI (Headline) 5.70 (e) (e) PPI(all items) monthly = domestic % 5.20 (e) (e) R/$ (month average) R/ =.92 R/ =.04 ( 07 Feb 20) Note: ( E = Estemate price - C = contract - Blue = acts) Petrol/ Diesel Price 02-Jan- 06-Feb- 06-Mar- 03-Apr- 01-May- 05-Jun- 03-Jul- 07-Aug- 04-Sep- 02-Oct- 06-Nov- 04-Dec- YR20 COASTAL 95 LRP (c/l) ULP (c/l) Diesel 0.05% (c/l) Diesel 0.005% (c/l) Illuminating Paraffin (c/l) Liquefied Petroleum Gas (c/kg) GAUTENG Transnet Freight Rail News Briefs Page 5 of 8

6 93 LRP (c/l) ULP (c/l) ULP (c/l) Diesel 0.05% (c/l) Diesel 0.005% (c/l) Illuminating Paraffin (c/l) Liquefied Petroleum Gas (c/kg) Jan- 01-Feb- 07-Mar- 04-Apr- 02-May- 06-Jun- 04-Jul- 01-Aug- 05-Sep- 03-Oct- 07-Nov- 05-Dec- YR20 COASTAL 95 LRP (c/l) ULP (c/l) Diesel 0.05% (c/l) Diesel 0.005% (c/l) Illuminating Paraffin (c/l) Liquefied Petroleum Gas (c/kg) GAUTENG 93 LRP (c/l) ULP (c/l) ULP (c/l) Diesel 0.05% (c/l) Diesel 0.005% (c/l) Illuminating Paraffin (c/l) Liquefied Petroleum Gas (c/kg) (SAPIA online) LME Official Prices, US$ per tonne for 20 February 20 Cash 22/02/20 ALUMINIUM ALUMINIUM COPPER LEAD NICKEL TIN ZINC NASAAC ALLOY Transnet Freight Rail News Briefs Page 6 of 8

7 Buyer months 20/05/20 Seller & settlement Buyer Seller Dec 1 17//2014 Buyer Seller Dec 2 16//2015 Buyer Seller Dec 3 21//2016 Buyer Seller months Buyer Seller months Buyer Seller (London Metal Exchange, 21/2/20) NOTE: Your attention is drawn to the following: Transnet Freight Rail News Briefs Page 7 of 8

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