Close High Low Daily change Change (%) Cash Settle

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1 : Daily Focus: Nickel physical premiums still trending lower 7 February 22 Focus: Although the fundamentals often get overlooked, in the case of nickel we expect the current weak physical outlook to continue weighing on the futures market. A better than expected Philadelphia Fed index sparked a recovery in base metal prices on Thursday afternoon, highlighting the relative strength of the US economy at the moment. The current US centric feel to the market is understandable given the chaotic situation in Europe, however, the commodity markets are now much more aligned with Chinese economic strength, from a physical perspective at least, rather than a US economy that is slowly finding its feet. The fact that the US is the only region to consistently post decent economic data arguably remains a cause for concern rather than celebration, in our view. A weaker dollar, along with a healthy dose of short-covering and bargain hunting gave precious metals a shot in the arm yesterday afternoon. However, the upward momentum faded in overnight trading with the complex trading mostly sideways. We expect this trend to continue into the weekend, as participants remain wary of taking on new positions ahead of Monday s Eurozone meeting. Strategists Walter de Wet, CFA* Walter.DeWet@standardbank.com Leon Westgate* Leon.Westgate@standardbank.com ames Zhang* inzhong.zhang@standardbank.com Marc Ground, CFA* Marc.Ground@standardbank.com The oil market moved higher again yesterday helped by continuous geopolitical tension and positive economic data from the US. WTI and Brent strengthened by 5c/ bbl and $.8/bbl respectively. The front-end of the Brent structure has gone exponential, with the spread between the first two months futures contracts exceeding $/ bbl, the widest level for more than two months. Commodity price data (6 February 22) Base metals LME 3-month Open Close High Low Daily change Change (%) Cash Settle Change in cash settle Cash - 3m Aluminium 2,92 2,6 2,25 2, % 2, Copper 8,359 8,3 8,379 8, % 8, Lead 2,55 2,5 2,64 2, %, Nickel 2, 9,9 2, 9, % 9, Tin 24,5 24,5 24,789 23, % 24, Zinc 2,24,978 2,25, %, Energy Open Close High Low day/day Change (%) ICE Brent % NYMEX WTI % ICE Gasoil,8.5,9.25,.75, % API2 Q2' % Precious metals AM Fix PM Fix High bid Low offer Closing bid Change (d/d) EFP's Gold,76.,73.,729.5,76.3, /.8 Silver /.5 Platinum,62.,6.,633.,62., /3.5 Palladium /. Sources: Standard Bank; LME; BBG Please refer to the disclaimer at the end of this document.

2 Daily 7 February 22 Focus: Nickel physical premiums still trending lower The physical nickel market continues to look incredibly weak. Physical premiums have continued to fall so far during 22, while on-warrant LME inventories have also remained on an upward trend over anuary and into February, bucking the normal seasonal pattern. Ordinarily, LME nickel inventories build during late Q3 and into Q4, before being drawn down in anuary and February as participants restock ahead of an expected pick up in economic activity. So far this year however, both anuary and February (to date) have shown stock increases, up 5% and 2.9% respectively. The last time both anuary and February showed increases in LME nickel inventory was 29, in the immediate aftermath of the 28 financial crisis. Also reflecting weak physical demand, and in conjunction with the LME inventory figures are physical premiums, which are now back around cycle lows. Rather than pick up during Q, against the backdrop of rising LME stocks, premiums have remained under pressure. Concern over other nickel stocks, such as in the Shanghai bonded zone - currently estimated at around 3 kt - is also building. Therefore, rather than scare the market back into action, the nickel price rally seen in anuary merely served to see the physical market retreat further, while at the same time allowing high cost swing production in China to restart. With nickel still very much a fundamentally driven metal (potential Chinese financing activity aside), and with the US the only real bright Regional physical nickel premiums ($/mt) n a r- p A l- u t- c O Singapore Full Plate South Korea Full Plate Shanghai Bonded - n a Source: Standard Bank, Fast Markets, r- p A l- u t- c O 2 - n a Singapore Briquettes Roterdam Full Plate spot at the moment for economic activity, we continue to find it hard to see how nickel prices can rally sustainably. Although the fundamentals often get overlooked, in the case of nickel we expect the current weak physical outlook to continue weighing on the futures market. By Leon Westgate Base Metals A better than expected Philadelphia Fed index sparked a recovery in base metal prices on Thursday afternoon, highlighting the relative strength of the US economy at the moment. The current US centric feel to the market is understandable given the chaotic situation in Europe, however, the commodity markets are now much more aligned with Chinese economic strength, from a physical perspective at least, rather than a US economy that is slowly finding its feet. The fact that the US is the only region to consistently post decent economic data arguably remains a cause for concern rather than celebration, in our view. Copper rallied initially overnight as follow through buying emerged. Prices quickly retreated however, with another large increase in SHFE exchange stocks denting sentiment. SHFE inventories set a new record, gaining 8.9 kt last week to come in at 27. kt. The discount between physical SHFE metal and the March SHFE contract also widened, coming in at CNY 34/ mt. Taken together, the figures point to continuing weak Chinese demand. Shanghai bonded premiums also remain under pressure, currently heard at $5-7/mt for clean material, compared to $-25/mt just before the Chinese New Year holiday. In contrast to the SHFE figures, LME copper inventories have continued to fall, with outflows in Busan, Gwangyang, New Orleans, Chicago and St Louis all contributing to the net 4,75 mt fall in headline copper stocks this morning. Lead has followed copper for much of the morning, however the triggering of stops, in fairly thin conditions, has seen the metal rally strongly ($3 in the space of 5 minutes) ahead of US trade. Lead has seen a large drop in on-warrant LME stocks, due primarily to a 4,35 mt jump in cancelled warrants in Singapore, however the price action was unrelated to the inventory figures. This afternoon sees another wave of US data, including the anuary CPI figures (expected +.3% m/m) and the anuary Leading Indicators (expected +.5%). Ahead of the long weekend in the US, the afternoon session may be quieter than normal, however the US data, plus headlines from Europe, will again help dictate price direction this afternoon. 2 By Leon Westgate

3 Daily 7 February 22 Precious metals Yesterday, precious metals joined most other asset markets on a roller coaster ride as the morning s pessimism gave way to excitement over the US economy and perceived progress in solving the Greek situation. US jobless claims numbers eased off, with initial and continuing claims falling to 348k and 3,426k respectively (from 36k and 3,526k respectively). The initial claims number was the lowest since 28. In addition, housing starts also grew expectedly (.5% m/m, consensus was for a 3.4% m/m decline) and the Philadelphia Fed Index showed strengthening industrial activity in the region, adding to optimism that the US economy was gaining traction. Eurozone officials yesterday expressed their optimism that finance ministers would give approval to Greece s second bailout package at this Monday s meeting. There was also news from Athens, with officials there also optimistic that the government was close to achieving the additional 325m in spending cuts. Reports that the European governments might reduce interest rates on Greece s bailout loans also bolstered market confidence. Lastly, the ECB has pledged further involvement in the debt restructuring programme. The above contributed to a weaker dollar, which along with a healthy dose of short-covering and bargain hunting gave precious metals a shot in the arm yesterday afternoon. However, the upward momentum faded in overnight trading with the complex trading mostly sideways. We expect this trend to continue into the weekend, as participants remain wary of taking on new positions ahead of Monday s Eurozone meeting. Perhaps, given yesterday's reaction to positive US data flow, we could see some price action after this afternoon s leading indicator numbers though this would depend on the dollar s reaction. Gold support is at $,74 and $,697. Resistance is $,739 and $,747. Silver support is at $32.93 and $32.35, resistance is at $33.83 and $34.4. Platinum support is at $,64 and $,592, resistance is at $,648 and $,658. Palladium support is at $682 and resistance at $75. By Marc Ground Energy The oil market moved higher again yesterday helped by continuous geopolitical tension and positive economic data from the US. WTI and Brent strengthened by 5c/bbl and $.8/bbl respectively. Nymex RBOB gasoline outperformed across the oil complex yesterday. The front-end of the Brent structure has gone exponential, with the spread between the first two months futures contracts exceeding $/bbl, the widest level for more than two months. Meanwhile, the contango at the front-end of the WTI curve flattened slightly due to the supply disruption of Canadian crude. Oil product stocks in the ARA region fell by 342kt w/w, driven mainly by a fall in gasoline stocks and fuel oil stocks, while jet and gasoil stocks remained largely flat. In Singapore, total product stocks declined by 335kb, with changes in light-distillates, middle-distillates and residual at -.6mb, +.mb and =.2mb respectively. It appears that the supply for middle-distillates has been generally improving, which is likely to see gasoil crack weakening further. The US weekly employment report and anuary s housing starts data continue to point to a stronger US economic recovery, which kept the market in a bullish mood. In addition, the restructuring of Greek debt appeared to have made some progress after recent uncertainties. Consequently, the euro recovered from the recent sell-off yesterday, which in turn pushed the oil price higher. Our bias toward Brent turned bearish at the end of last week, which proved to be premature given the price actions so far this week. Now with $2/bbl being printed, we see the risk of a substantial reversal in the Brent price increasing by the day. The open interest in the Brent futures market has started to fall, signalling that buying power might have been exhausted. Technically, more signals for a price reversal are appearing. Volatility appears to be stabilising at a low level, which also carries a significant risk of small spikes. Product cracks and refining margins will continue to be eroded as high prices erode demand for oil products. Now is the ideal time for producer hedging, as the strong rally in flat prices and low volatility present an opportunity for inexpensive downside protection. By ames Zhang 3

4 Daily 7 February 22 Base metals Daily LME Stock Movement (mt) Metal Today Yesterday In Out Energy One day change YTD change (mt) Cancelled warrants (mt) Cancelled warrants (%) Contract turnover Aluminium 5,7,975 5,2,3 5 3,825-3,325 47,575,55, ,965 Copper 3,25 33,5 5 2,425 -,925-59,775 86, ,325 Lead 382,25 383,3,325 2,6 -,275 28,95 42, ,696 Nickel 97,77 95,72 2, ,58 7,722 3, ,628 Tin, 9, ,9, ,7 Zinc 85,3 846,925 3, ,375 28,6 4,5.49 4,942 Shanghai 3-month forward prices COMEX active month future prices Metal Open Last d Change Open Close Change Change (%) Aluminium 6,85 6,65 2 Ali Mar' Copper 59,8 59,92 63 Cu Mar' % Zinc 5,72 5,665 5 ZAR metal prices Aluminium Copper Lead Nickel Tin Zinc ZAR/USD fix Cash 6,66 64,69 5,622 55,472 88,99 5, month 7,28 66,63 6,63 58,633 9,356 5, Energy futures pricing Price Change Price Change Price Change Price Change Price Change month 2 month 3 month 6 month year Sing Gasoil ($/bbbl) Gasoil.% Rdam ($/mt), , , NWE CIF jet ($/mt), , , , , Singapore Kero ($/bbl) % Rdam barges ($/mt) % Fuel Oil FOB ($/mt) Sing FO8 Cargo ($/mt) Thermal coal Q2-2 Q3-2 Q4-2 Cal 3 Cal 4 API2 (CIF ARA) API4 (FOB RBCT) Precious metals Forwards (%) month 2 months 3 months 6 months 2 months Gold Silver USD Libor Technical Indicators 3-day RSI -day MA 2-day MA -day MA 2-day MA Support Resistance Gold 55.85,728.3,724.65,683.84,664.5,74.,739. Silver Platinum 57.78,643.9,62.89,542.33,659.7,64.,648. Palladium Active Month Future COMEX GLD COMEX SLV NYMEX PAL NYMEX PLAT DGCX GLD TOCOM GLD CBOT GLD Apr'2 Mar'2 Apr'2 Apr'2 Apr 2 Dec'2 Apr'2 Settlement, ,626., ,49.,728.5 Open Interest 438,74 6,62 2,864 44,26 3,349 27,396,6 Change in Open Interest 7,, ,497-3 Sources: Standard Bank; LME; Bloomberg 4

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