Over in the East, once formidable commodities trader Noble Group is struggling amidst a heavy debt load, ratings downgrades, allegations of fraudulent accounting, asset sales and a crashing stock price.
What is Noble?
Noble Group is a diversified commodities trader dealing in oil, natural gas and non-ferrous metals (like alumina). It was founded in Hong Kong in 1986 but later moved to Singapore. In 2015, a small research firm called Iceberg Research produced a report suggesting that Noble “had been reporting higher net profits than the sums it was generating from its cash sales”.
It has recently sold it’s entirely holdings in North American energy distribution worth more than US$1bln and its agricultural holdings for more than US$2bln. The company has over US$2bn in debt to roll over soon and a recent possible investor, Sinochem from China, has decided it no longer wants to invest at this time.
It’s stock market capitalization has plummeted from US$1.2bln on May 10, 2017 to about US$400mn on May 23, 2017. This is a stark contrast to the company’s market cap of US$6bln on February of 2015. In addition Noble was downgraded to CCC+, or junk by S&P. The South China Morning Post stopped just short of comparing the entity to Enron.
What is Noble’s relationship with Jamaica?
Noble Group purchased 55% of Jamalco from Alcoa in 2014 for a reported US$140mln. The other 45% of Jamalco is retained by the Jamaican Government through an entity called Clarendon Alumina Partners (CAP). As part of the arrangement Alcoa was kept on to manage the plant for three years.
The deal provided Noble with an estimated 778,800MT of alumina annually based on Jamalco’s production capacity. (See http://jamaica-gleaner.com/power/56026).
What if Noble goes bankrupt?
Jamalco is one of the best alumina producing plants in the Western Hemisphere. The problem with it, is that it is in the Western Hemisphere, far from the low cost aluminium smelters. The current price of aluminium is US$1,943 per metric tonne, alumina is therefore some fraction of that price. In April, Australian Alumina sold for US$417 per metric tonne, but then they are in the Eastern Hemisphere where demand is greater.
Jamalco, however, being an efficient producer, is well positioned to be in high demand should Noble decide to sell its assets.