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COMMODITY NEWSBRIEFS: 18 JANUARY 2016
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AUTOMOTIVE SA NOT SET UP AS ‘DREAM SCENARIO’ FOR INVESTORS, SAYS TRUCK MAKER (Engineering News, 18/1/2016) It is highly unlikely that the board of the AB Volvo Group will invest in South Africa in 2016 as it did in 2015, says Volvo Group Southern Africa (VGSA) president Torbjörn Christensson. The truck and heavy equipment group invested more than R100-million in the country last year, through the opening of new dealerships and a new used truck facility, and upgrading its competence development centre as well as it regional distribution centre. The board would now like to see some pay-off from its investments, notes Christensson. “They also want to wait and see how the [South African] economy develops. Lately there have been a lot of negatives stacking up on top of each other.” He adds that South Africa is not “set up” as a “dream scenario” for investors. “Before it was easier to get money to invest.” Christensson says it is becoming increasingly difficult to counter the bad news flowing to Sweden. The Scandinavian country “only hears” about the strikes and a new finance minister appointed on Wednesday and departing on Sunday. They do not hear about the “positive fundamentals” present in South Africa, he says. Christensson describes “his board in Sweden” as being “very cautious” on South Africa at the moment. “Everybody is waiting to see what will happen.” Christensson also laments the sudden and dramatic weakening of the rand against major currencies, which will “hit” the truck importer and assembler, as well as the South African truck industry, “tremendously hard”. Christensson says VGSA has lost 15% on the value of the trucks imported into South Africa over the last few weeks, owing to the rand, while it will need to pay an average of 5% more on salaries this year. VGSA imports the Renault, Volvo and UD truck brands into South Africa, assembling Volvo trucks in Durban, and UD trucks in Pretoria. It employs 900 people. INDUSTRIAL WEAK RAND A ‘WINDOW OF OPPORTUNITY’ FOR STRUGGLING MANUFACTURERS (Engineering News, 18/1/2016) The recent sharp decline in the rand is yet to filter through to the manufacturing sector, but new Manufacturing Circle executive director Philippa Rodseth is cautiously optimistic that the depreciation will result in increased exports in the coming months. However, she warns that it cannot be seen as a “silver bullet”, noting, too, that a number of countries outside Europe and the US have faced similar currency depreciation, meaning that the domestic industry’s relative competitive position may not have changed as materially as would have been thought. Nevertheless, the Manufacturing Circle, which has argued since its founding in 2008 that a competitive currency remains a key element of enhancing competitiveness, believes a “window of opportunity” may be opening on the export front. Speaking amid signs that manufacturing output in the fourth quarter of 2015 probably contracted with the December Purchasing Managers' Index (PMI) showing continued weakness,
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Rodseth said a competitive currency was insufficient in itself to stimulate a revival in the sector’s fortunes. The seasonally adjusted Barclays PMI rose to 45.5 index points in December, up from a six-year low of 43.3 points in November. However, it was still indicative of a contraction in manufacturing activity and suggestive of ongoing production pressure for the fourth quarter as a whole. Statistics South Africa reported earlier that manufacturing output declined by 1.2% in November, having fallen by 1.7% in October. Questions were being asked, however, as to why the steady depreciation of the rand in 2015, which has accelerated since December was not resulting in an improved performance from domestic manufacturers, with the currency offering natural protection at home and bolstering competitiveness abroad. Another key problem relates to weak demand, particularly for manufacturers either directly or indirectly supplying into the domestic or global resources sector. Respondents to the Manufacturing Circle’s third quarter survey reported muted domestic sales, with only 41% of the 88 respondents reporting an increase and 46% a decrease in domestic sales during this period. Export sales fared better, with 44% of the manufacturers experiencing an increase during the period. Nevertheless, Rodseth acknowledged that prevailing rand weakness could offer a tailwind from some manufacturers in 2016 and that she was also keen to prioritise actions that sought to improve export market access and knowledge in the coming months. FUEL RAND WEAKNESS TAKES SHINE OFF FUEL PRICE (News24, 18/1/2016) If the rand/dollar exchange rate had remained flat in 2015, South Africans would currently have been paying on average 45 cents a litre less at the pumps, the Automobile Association (AA) said on Friday. This estimate is based on unaudited mid-month data released by the Central Energy Fund (CEF). "South Africa's sagging rand/US dollar exchange rate continues to take the shine off ongoing international oil price weakness," the AA explained. "This deficit has widened by another 32 cents to 40 cents in the first two weeks of January 2016, turning what would have been a 24 cents a litre drop in petrol at the end of the month into a potential increase of up to 16 cents." As for diesel, the AA said an oil price benefit of around 90 cents a litre to the diesel price has instead been muted to around 58 cents a litre by the exchange rate, with illuminating paraffin showing a similar picture. "The exchange rate's ongoing weakness might mean trouble for the fuel price if oil prices begin to tick up again," the AA said. "At the current rand/US dollar exchange rate, a return to oil's highs of 2013 and 2014 would result in the fuel price approaching R20 a litre, putting yet more pressure on South Africa's already-strained economy." The rand weakened in early trade on Friday, erasing gains of the previous session, as global risk aversion caused by fears over the health of the global economy on falling oil prices hit risk assets, Reuters reported. By 17:00 on Friday the rand was trading at R16.68 to the dollar. COAL KEATON’S VANGGATFONTEIN DELIVERS RECORD Q3 THERMAL COAL OUTPUT (Mining Weekly, 18/1/2016) Coal miner Keaton Energy’s Vanggatfontein mine achieved record thermal coal production in the third quarter ended December 31, with 544 237 t delivered to power utility Eskom. This compared with the 540 127 t of thermal coal delivered to the utility in the third quarter of the prior year. However, 5-seam metallurgical coal sales fell 40% year-on-year to 18 456 t. The company’s troubled KwaZulu-Natal operations, which were held for sale, continued to perform poorly. Vaalkrantz saw a 71% year-on-year decrease in local anthracite sales to 10 457 t, while export sales fell 19% year-on-year to 18 600 t. “Yet again, our long-life Vanggatfontein colliery has performed consistently and continues to generate excellent production and cash flow numbers. GRAIN S AFRICA WILL NEED TO IMPORT UP TO 6MT OF MAIZE – ZOKWANA (Engineering News, 18/1/2016) South Africa will have to import between five-million and six-million tons of white and yellow maize, Agriculture, Forestry and Fisheries Minister Senzeni Zokwana said during a media briefing on Friday. National Agricultural Marketing Council CEO Ronald Ramabulana noted that this would have a significant impact on the cost of maize in South Africa, while Grain SA CEO Jannie de Villiers outlined that it would cost roughly R20-billion to import the maize. “We are not even talking about wheat, soya or bean meal,” he added. De Villiers warned that the country’s stock of white maize would run dry by September, adding that it would not be easy to secure supply from elsewhere in the world, as only the US and Mexico produced white maize. Meanwhile, Zokwana said he was confident that the country’s ports had capacity to handle the
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expected imports, but better coordination between port use and internal logistics would be needed. The Minister further said farmers should not believe that they are alone in their hour of need and that the Department of Agriculture, Forestry and Fisheries had, together with the Department of Rural Development and Land Reform, committed R371.7-million for Land Care programmes in the coming year. He noted that these programmes were a community-based and government-supported approach to the sustainable management and use of agricultural natural resources. He also highlighted that his department had, together with the Department of Cooperative Governance and Traditional Affairs, made a request to National Treasury for additional funds to further assist farmers in dealing with the current drought disaster. MINERAL MINING POLICY UNCERTAINTY, DMR LEADERSHIP ‘CHALLENGES’, WEAK PRICES BODE ILL FOR MINING SECTOR IN 2016 (Mining Weekly, 18/1/2016) Over the last few years, South Africa’s mining industry has staggered into the new year increasingly the worse for wear, having been ravaged by a myriad of challenges over the course of the previous year, including mineral policy uncertainty, labour-management disputes, waning investor confidence, ever-rising operating costs and falling commodity prices. The effect of these challenges over the course of the last four years is firmly illustrated by the fact that mineral exports, as a percentage of total merchandise exports, declined from 35% in 2011 to 26% last year, while mining’s contribution to the JSE declined from 38% to just 15% and its contribution to foreign direct investment inflows fell from some 33% to 15% over the same period. While it is certainly clear that South Africa’s mining industry has had a rough few years, it is anticipated that 2016 will be one of the most challenging years yet. Undoubtedly, what will prove most debilitating to the functioning of the South African mining sector this year is not only continued uncertainty over mineral policy but also the leadership challenges within the Department of Mineral Resources (DMR). As if regime uncertainty was not enough of a challenge to contend with, three of the world’s largest financial institutions, Goldman Sachs Group, Morgan Stanley and Citigroup, have asserted that commodity prices are unlikely to rebound this year and could remain at a relatively subdued level for years to come. Given that metals prices fell by some 16% year-on-year in 2015, the outlook does not bode well for miners. Factors that will contribute towards the continued subjugation of the commodity market include persistent oversupply, the potential further weakening of Chinese economic growth and ongoing negative sentiment toward commodities. According to Citigroup, platinum is expected to average $1 105/oz, gold $1 000/oz, coking coal $97/t and iron-ore just $40/t. Depressed commodity prices, coupled with increasing operating costs, especially in light of the country’s most recent fiscal woes, is anticipated to put significant pressure on the country’s mines, particularly those already operating at a marginal level. COMMODITIES ON A SLIPPERY SLOPE (Mail & Guardian, 15/1/2016) As the wheels come off a decade-long commodities supercycle, Africa’s oil-producing and metal rich giants face a dangerous mix of lower export revenues, depreciating currencies, declining financial flows from China, falling domestic demand and higher debt costs following last month’s United States interest rates rise. CURRENCIES AND PRICES
JSE AS AT 17:11PM 15 JANUARY 2016
All Share Index
15/01 46,960 - 1.55%
Industrials Index
15/01 37,705 - 3.06%
Financials Index
15/01 37,247 - 2.34%
Top 40 Index
15/01 42,105 - 1.49%
Industrial 25 Index
15/01 67,064 - 1.19%
Financial 15 Index
15/01 13,683 - 2.49%
Resources 10 Index
15/01 23,093 - 1.90%
Alt-X Index
15/01 1,513 - 0.29%
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WORLD INDICATORS
FOREX
Rand/Dollar 06:40 16.6816 + 1.17%
Rand/Pound 06:40 23.7724
+ 0.06%
Rand/Euro 06:40 18.1617 + 1.57%
COMMODITIES
Gold (usd/oz) 06:42 1,092.36 + 1.19%
Platinum (usd/oz) 06:42 827.99
- 0.37%
Brent (usd/barrel) 06:42 28.67 - 7.61%
WORLD MARKETS
Wall St (DJIA) 15/01 15,988 - 2.39%
Germany (DAX) 15/01 9,545
- 4.17%
Japan (Nikkei) 06:42 16,906 - 1.41%
3month
(Business Report, 18/1/2016)
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(TFR Commercial Management: Business Performance Dept)
Petrol/ Diesel Price
YR2016
06-Jan-
16
03-Feb-
16
02-Mar-
16
06-Apr-
16
04-May-
16
01-Jun-
16
06-Jul-
16
03-Aug-
16
07-Sep-
16
05-Oct-
16
02-Nov-
16
07-Dec-
16
COASTAL
95 LRP (c/l) 1194.00
95 ULP (c/l) 1194.00
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Diesel 0.05% (c/l) 972.47
Diesel 0.005% (c/l) 977.87
Illuminating Paraffin (c/l) 594.028
Liquefied Petroleum Gas
(c/kg) 1892.00
GAUTENG
93 LRP (c/l) 1209.00
93 ULP (c/l) 1209.00
95 ULP (c/l) 1237.00
Diesel 0.05% (c/l) 1005.17
Diesel 0.005% (c/l) 1010.57
Illuminating Paraffin (c/l) 647.028
Liquefied Petroleum Gas
(c/kg) 2074.00
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 1197,00
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 1197,00
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 1048,47
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 1055,87
Illuminating Paraffin (c/l) 697.728 595.728 668.728 690.828 685.828 727.828 733.828 663.828 608.828 658.828 656.828 657,028
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 1847,00
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 1209,00
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 1209,00
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 1240,00
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 1081,17
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 1088,57
Illuminating Paraffin (c/l) 747.928 645.928 718.928 743.828 738.828 780.828 786.828 716.828 661.828 711.828 709.828 710,028
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 2029,00
(SAPIA online) Daily prices for 15 January 2016
LME Official Prices, US$ per tonne
Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC
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Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC
Cash Buyer 1560.00 1467.00 4310.00 1610.00 8375.00 13350.00 1469.00 1720.00
Cash Seller & Settlement 1561.00 1467.50 4310.50 1612.00 8380.00 13375.00 1470.00 1730.00
3-months Buyer 1580.00 1467.00 4320.00 1606.00 8405.00 13395.00 1478.00 1730.00
3-months Seller 1585.00 1467.50 4320.50 1608.00 8410.00 13400.00 1479.00 1740.00
15-months Buyer 13345.00
15-months Seller 13395.00
Dec 1 Buyer 1660.00 1525.00 4305.00 1635.00 8550.00 1527.00 1800.00
Dec 1 Seller 1670.00 1530.00 4315.00 1640.00 8650.00 1532.00 1810.00
Dec 2 Buyer 1580.00 4320.00 1663.00 8650.00 1542.00
Dec 2 Seller 1585.00 4330.00 1668.00 8750.00 1547.00
Dec 3 Buyer 1647.00 4335.00 1707.00 8720.00 1547.00
Dec 3 Seller 1652.00 4345.00 1712.00 8820.00 1552.00
(London Metal Exchange, 18/1/2016)
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