Transnet Freight Rail News Briefs Page 1 of 8

COMMODITY NEWSBRIEFS: 7 DECEMBER 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

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

AUTOMOTIVE CHINESE CAR PLANT TO BOOST LOCAL INDUSTRY (Business Day, 7/12/2015) A proposed R12bn Chinese car plant in SA could make an important contribution to the domestic motor industry’s achieving its ambitious production goals, says Nico Vermeulen, director of the National Association of Automobile Manufacturers of SA. It will also be the first major new manufacturer to enter the South African market in more than 40 years, joining BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen. Trade and Industry Minister Rob Davies announced last week that the local Industrial Development Corporation (IDC) had signed a deal with Beijing Automobile Works (BAW) to build BAW cars in SA. The R12bn deal was the largest in a package of South African-Chinese investment agreements totalling R94bn. Early betting, however, is that the plant will be in the Eastern Cape, where Volkswagen, Mercedes-Benz and General Motors all build vehicles and Ford has an engine-manufacturing plant. Another Chinese company, FAW, has spent R600m on a truck factory near the Coega port outside Port Elizabeth. FAW has said it may eventually also build passenger vehicles. BAW already has a minibus-taxi assembly plant in Springs, east of Johannesburg. The IDC is also a partner there. It is believed the investment has nothing to do with Mr Davies’s recent announcement of changes to the government-administered 2013-20 Automotive Production and Development Programme. From next year, the minimum annual production threshold at which motor companies will be able to claim incentives, will fall from 50,000 to 10,000. For R12bn, however, the new plant is expected to be capable of building well over 50,000. IRON DOWN AGAIN: IRON ORE SINKS BELOW $40 A TONNE (Mining, 7/12/2015) Iron ore prices got hammered again Friday, sinking to a 10-year-low of $39.40 a tonne, the lowest ever recorded by price assessor The Steel Index (TSI), which began compiling data in 2008. Prices were set for their steepest weekly drop in five months. According to Metal Bulletin, the spot price for benchmark 62% fines traded Friday just above the critical $40/tonne mark (at $40.03). Prices were set for their steepest weekly drop in five months as declining Chinese steel demand keeps adding to a global oversupply of the steelmaking raw material. Iron ore has not traded this low since around 2007, when annual contract pricing between the Big 3 producers — Vale, Rio Tinto and BHP Billiton — and Chinese and Japanese steelmakers were still the industry norm. Brazil’s Vale the world's largest producer, cut its forecast for 2016 shipments by 10% due to outages at Samarco, but it remains on track to add 100 million tonnes of capacity compared with 2015 levels within just three years. Number two Rio Tinto is well on its way to reach 360 million tonnes in the next few years, while BHP Billiton is on target to grow capacity to 290 million tonnes per year sometime during 2017. Chief executive Andrew

Transnet Freight Rail News Briefs Page 2 of 8

Mackenzie said Thursday that the only way to compete in a world where there was ample capacity to meet the needs of countries like China was to keep cutting costs, which means prices will keep coming down. STEEL STEEL PROFIT SECONDARY TO CHINA MILLS EXPORTING RECORD SURPLUSES (Mineweb, 7/12/2015) Steelmakers in China are so determined to unload a mountain of unwanted metal on the world that profit has become less important than sales. After years of expanding capacity to keep up with surging demand at home, Chinese mills that account for half the globe’s output are shifting to buyers across Asia, Europe and the Americas as the domestic economy slows. Fueled by lower prices, steel-product exports are up 25 percent this year through October to 92 million metric tons, sending mill losses this year to as much as $537 a ton, data compiled by Bloomberg Intelligence show. The onslaught has compounded a global surplus that probably will last for years, Standard & Poor’s Ratings Services estimates. In India, where the government imposed a 20 percent tax in September to slow a surge of cheap imports, Chinese mills just cut prices to keep shipments flowing, which means they are probably losing about $90 a ton, according to Mumbai-based JSW Steel Ltd. Low-cost supply from China in Europe forced producer ArcelorMittal to reduced its profit forecast and suspend its dividend, while top U.S. steelmaker Nucor Inc. idled as much as 35 percent of capacity. “The problem with China is that they want to sell at any price, notwithstanding the losses that they are incurring,” said Seshagiri Rao, the chief financial officer at JSW Steel, India’s third-largest steelmaker. That’s an “unfair trade” strategy, Rao said. Top steelmakers in China insist otherwise, noting that overcapacity is a global issue that will take time to work itself out. India’s government signalled Wednesday more curbs on steel imports will be introduced within weeks. The basket of products that face the 20 percent safeguard tax may be widened, according to Steel Secretary Aruna Sundararajan, who said the country may also impose anti-dumping duties. Regulators in other countries also are acting. A month ago, the U.S. Department of Commerce proposed a 236 percent duty on imports of corrosion-resistant steel from five Chinese companies, including Angang Group Hong Kong Co. and Baoshan Iron & Steel Co. At the time, Baoshan called the levy unfair and said its pricing was based on market forces. Chinese mills can afford to undercut competitors because the government provides export rebates and subsidies for production, Cola said. Hot-rolled coil, a benchmark for steel, cost $284 a ton in China, while the same product fetched $330 in the U.S. and $420 in India, according to data from Metal Bulletin Ltd. Slumping global prices have been a boon to manufacturers, who say Chinese supplies remain an attractive alternative because they are so much cheaper than domestic steel. FUEL SOUTH AFRICA PLANS 2016 TENDER FOR FLOATING LNG IMPORT TERMINAL (Engineering News, 7/12/2015) South Africa is working toward launching a tender for the country's first floating gas import terminal in the first half of 2016, Karen Breytenbach, head of the Department of Energy's IPP office said on Thursday. Breytenbach said the government hoped to launch a request for pre-qualifications in the first quarter of next year for a floating storage and regasification unit (FSRU), followed by a request for proposals in the second quarter before making an award by the end of 2016. "The decision has been taken to do gas to power and because we don't have indigenous gas we are relying on LNG," she said. Importing LNG is among the options Africa's most developed economy is considering to diversify its energy sources away from coal and ease power shortfalls that have curbed growth. Breytenbach said the aim was to begin importing LNG by 2018/19. MINERAL MINING AFRICA WANTS TO PROCESS OWN MINERALS – ZUMA (Engineering News, 7/12/2015) African countries want to process their minerals on the continent, rather than export them for beneficiation overseas, President Jacob Zuma said on Friday at the Forum for China-Africa Cooperation Summit (FOCAC) currently underway in Johannesburg. “We want to prioritise beneficiation and value-addition. In that way, what is buried in the belly of our soil will translates into benefit for the bellies of our citizens,” Zuma told the opening ceremony of the summit, attended by many African heads of state and Chinese President Xi Jinping.

Transnet Freight Rail News Briefs Page 3 of 8

TRANSNET TRANSNET ‘A MODEL OF SA-CHINA TEAMWORK’ (Business Report, 7/12/2015) The relationship between Transnet and China’s State-owned Assets Supervision and Administration Commission (Sasac) was held up as an example of a model partnership when Minister of Public Enterprises Lynne Brown and Sasac chairman Zhang Yi visited Transnet Engineering’s Koedoespoort plant in Pretoria on Thursday. Brown and Zhang spoke glowingly about the partnership, describing it as win-win, and expressing hope that it would be deepened and expanded in years to come, perhaps even becoming a symbol of Chinese-South African co-operation. The visiting party inspected new locomotives, some of which had been assembled locally and others assembled in China, as proof of successful localisation and skills transfer. Zhang said his organisation sought to help South Africa improve its own capability in rail as much as possible, even if that meant surpassing China’s own capability. Brown, who said she was very happy with the performance of Transnet, noted that its impressive progress was at least partly thanks to the co-operative relationship with Sasac. GENERAL MARKET BRACES FOR RATING BACKLASH (Business Day, 7/12/2015) Domestic markets look set to weaken today — reflecting capital outflows as investors digest Friday’s decision by one global ratings agency to downgrade SA and another agency’s decision to change its outlook to negative. The ratings agency decisions are a clear wake-up call to the government to quickly implement reforms that will grow the economy faster and to adopt policies that will make businesses more confident, analysts say. A lower investment grade rating means a higher risk is attached to that country’s debt and, therefore, the country must pay more when it borrows. Lower ratings also mean a country becomes less attractive to investors who prefer higher investment-grade rated bonds. The concerns the two agencies raise for their decisions are the same and not new: weak economic growth, slow implementation of reforms that will help the economy grow faster, persistently large current account and budget deficits, rising public debt and high unemployment. Fitch downgraded SA’s sovereign credit rating from BBB to BBB-, which is the lowest investment-grade rating and a level away from junk status, but changed its outlook to stable from negative. More concerning, however, was Standard & Poor’s (S&P) affirming its BBB- rating, but altering its outlook to negative from stable — implying a downgrade to junk was unavoidable if growth continued to falter. Some of SA’s problems are put squarely on the government’s policy blunders. Business confidence may improve if the government “takes the necessary steps” to improve policy co-ordination and implement delayed legislation, which may help to bolster the muted private sector fixed investment, S&P said. The move could see S&P downgrade SA’s rating to subinvestment grade — “junk” status — within the next 18 to 24 months. That has severe implications for capital flows, the rand, and for SA’s banks and corporate borrowers. The effect of Friday’s ratings moves is that SA is now only just investment grade in the eyes of two of the three major global credit ratings agencies. And they are looking to take the rating over the edge into junk — if SA’s leadership does not get its act together to make some tough choices. The issue that looms largest in both ratings reports is growth. Some might be complacent about the fact that SA has avoided recession, unlike peers such as Brazil or Russia. Fitch and S&P don’t buy that. SA’s very weak growth performance and outlook topped the list for both agencies as the reason for their negative rating actions. Both are concerned that SA’s growth rate in the next couple of years could turn out to be even lower than they expect. S&P is particularly concerned about weak levels of business confidence and private sector investment, and there is a clear message from the agency that SA needs to do a lot more to boost business. From Fitch comes a tart, if polite, comment about the government’s evident inability to take the growth challenge seriously: “Government policies such as the visa regulations (since abolished) and delays to the mineral resources law and prospective plans for land reform and a national minimum wage are not always conducive to economic growth,” says Fitch. Many dismiss ratings agencies as irrelevant, but their views matter to the lenders and institutional investors that SA relies on for funding. As long as SA continues to run high fiscal and current account deficits, it will need international funding in sizeable quantities — and it will need to take ratings seriously if it wants to raise that funding at affordable rates.

Transnet Freight Rail News Briefs Page 4 of 8

CURRENCIES AND PRICES

JSE AS AT 17:10PM 4 DECEMBER 2015

All Share Index 4/12 49,261

- 1,163.81 - 2.31%

Industrials Index 4/12 41,038

- 974.69 - 2.32%

Financials Index 4/12 41,541

- 1,000.72 - 2.35%

Top 40 Index 4/12 44,347

- 1,023.93 - 2.26%

Industrial 25 Index 4/12 68,684

- 1,627.21 - 2.31%

Financial 15 Index 4/12 15,436

- 396.62 - 2.51%

Resources 10 Index 4/12 25,369

- 304.67 - 1.19%

Alt-X Index 4/12 1,539

- 14.07 - 0.91%

WORLD INDICATORS

FOREX

Rand/Dollar 06:37 14.3650

+ 0.01 + 0.09%

Rand/Pound

06:35 21.6460

- 0.06 - 0.28%

Rand/Euro 06:35 15.5962

- 0.09 - 0.60%

COMMODITIES

Gold (usd/oz) 06:36 1,084.96

+ 22.36 + 2.10%

Platinum (usd/oz)

06:36 884.08

+ 39.58 + 4.69%

Brent (usd/barrel) 06:36 42.67

- 1.17 - 2.67%

WORLD MARKETS

Wall St (DJIA) 4/12 17,848

+ 369.96 + 2.12%

Germany (DAX)

4/12 10,752

- 437.92 - 3.91%

Japan (Nikkei) 06:36 19,760

+ 255.75 + 1.31%

3 months

(Business Report, 7/12/2015)

Transnet Freight Rail News Briefs Page 5 of 8

(TFR Commercial Management: Business Performance Dept)

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 1218.00 1196.00

Transnet Freight Rail News Briefs Page 6 of 8

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

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

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

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

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

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

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

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

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

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

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

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

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

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)

Transnet Freight Rail News Briefs Page 7 of 8

Daily prices for 4 December 2015

LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1600.00 1502.50 4636.00 1667.00 9020.00 14840.00 1528.00 1710.00

Cash Seller & Settlement 1610.00 1503.00 4637.00 1669.00 9025.00 14860.00 1529.00 1720.00

3-months Buyer 1600.00 1510.00 4636.00 1664.00 9020.00 14825.00 1549.00 1720.00

3-months Seller 1610.00 1510.50 4637.00 1665.00 9030.00 14830.00 1550.00 1730.00

Dec 1 Buyer 1600.00 1540.00 4630.00 1677.00 9075.00 1578.00 1765.00

Dec 1 Seller 1610.00 1545.00 4640.00 1682.00 9175.00 1583.00 1775.00

15-months Buyer 14720.00

15-months Seller 14770.00

Dec 2 Buyer 1588.00 4630.00 1702.00 9160.00 1605.00

Dec 2 Seller 1593.00 4640.00 1707.00 9260.00 1610.00

Dec 3 Buyer 1643.00 4625.00 1725.00 9245.00 1623.00

Dec 3 Seller 1648.00 4635.00 1730.00 9345.00 1628.00

(London Metal Exchange, 7/12/2015)

NOTE: Your attention is drawn to the following: 1. USE

This Newsbrief is intended for the use of Transnet employees only. It is not to be disclosed or disseminated to outside parties, without the consent of a Transnet Freight Rail Manager who is authorised to communicate with external parties. The following specific terms apply: (a) Transnet Freight Rail hereby grants permission to its employees to view the Newsbrief, and copy, print and

use any of its contents, subject to the following conditions:

(b) The Newsbrief shall be used solely for information and/or commercial purposes within Transnet only, and shall not be disseminated to any external party, copied or posted on any external network computer or broadcast in any media. Any other use, including the reproduction, modification, distribution, transmission, re-publication, display or performance in any form, of the content of the Newsbrief without written permission from Transnet, is strictly prohibited.

(c) Sale or public distribution or copying for sale or public distribution of any material in the Newsbrief is strictly prohibited.

(d) No modifications to the Newsbrief shall be made.

(e) Use for any other purpose is expressly prohibited by Transnet and may result in disciplinary action against any transgressors, and civil and criminal action may also be taken. Violators will be prosecuted to the maximum extent possible.

2. COPYRIGHT, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY RIGHTS

Copyright in the Newsbrief vests in Transnet.

(a) All content included in the Newsletter, such as text, graphics, logos, button icons, images, audio clips,

Transnet Freight Rail News Briefs Page 8 of 8

software and information, is the property of Transnet or its content suppliers and protected by South African and international copyright law and all other intellectual property laws.

(b) The compilation (meaning the collection, arrangement and assembly) of all content in the Newsletter is the exclusive property of Transnet Freight Rail and protected by South African and international copyright law and all other intellectual property laws.

(c) The Transnet Freight Rail name and logo are registered trademarks of the company, protected by South African and international trademark laws and all other intellectual property laws.

(d) Note that any product, processes or service referred to in the Newsletter may be subject to other copyright, patent, trade mark or other intellectual property laws and may incorporate proprietary notices and copyright information relating to that product, process or service.