* Era of consolidation ahead for commodities merchants
* 'Plain common sense,' key to navigate harder times
* China demand to be consumer driven, not by industry
By Melanie Burton
LONDON, Oct 15 Commodities traders need to be
large and diverse, but still nimble, to flourish in the rockier
times ahead, Richard Elman, chairman of Hong Kong-based Noble
Group Ltd, said on Monday.
As prices for some commodities lose steam, Noble has chosen
a cross-commodity approach, rather than focusing on one area,
Elman said at a key note speech in London marking the start of
the industry wide London Metal Exchange (LME) week.
"We think that's key to surviving in the new, more
challenging world," Elman said.
"We have also tried to be big enough to remain
well-capitalised to survive the capital drought, yet not too big
that we can't change, adapt and be managed," he added.
Noble, headquarted in Hong Kong, but listed in Singapore, is
focusing on developing its metals portfolio after breakneck
growth in energy, which now delivers two thirds of its revenues.
Energy accounted for 64 percent of 2011 revenues, followed
by agriculture, at just under a quarter.
This summer it hired two metals traders in London and New
York to expand its business outside of Asia.
Since the heyday of huge price gains before the 2008 debt
crisis, commodity markets have seen a "seismic" shift, Elman
said. They are now facing huge constraints on capital, and on
working capital in the West, in particular, Elman said.
China, with its government-sponsored spending plans, has
emerged as the dominant market force, securing for itself a
larger slice of the commodity pie, said Elman. It now accounts
for around 40 percent of copper demand, up from 20 percent in
China's evolution into a consumer-driven economy, instead of
an economy driven by industrialisation will change the nature of
demand and trigger an era of consolidation among merchants.
New trade routes will emerge and new cities will spring up
in markets such as India and China that will become the main
drivers of business.
"The key to seizing this opportunity will be a combination
of rescaling businesses, focusing on the commodities newly
invigorated by an increasing consumer-driven economy, and one of
our preferred management tools at Noble: PCS," he said.
"What does PCS stand for? Plain Common Sense."
(Reporting by Melanie Burton; Editing by Louise Heavens)