London 22/08/2016 - Noble Group has scaled back its base metals business in China, with several key traders having left the company, sources with direct knowledge told FastMarkets.
Ouyang Xiuzhang, Noble's head of Asia Energy and Metals, has left the company - alongside other traders including George Liu, Lucy Lu, Lee Li and Christian Jiang - just a year after Noble opened its Shanghai office, according to several sources.
"They all left about half-a-month ago and it seems that Noble will be scaling back globally for base metals and focusing more on its main businesses such as coal," an industry insider said.
Noble does not comment on personnel changes, a company press officer said, but noted: "Noble is looking at reallocating capital from capital-intensive businesses such as metals and reallocating it to less capital-intensive businesses such as a oil, coal and ferrous metals."
The departures came three months after the resignation of Noble's then-CEO Yusuf Alireza and its board's subsequent appointment of William Randall and Jeff Frase as co-CEOs.
In October last year, a group of former Noble traders set up a new trading house called Concord Resources.
Noble's former global head of metals, Mark Hansen; physicals trader, Scott Evans; US-based Jeff Romanek; Singapore-based Felix Cauro; as well as David Freeland, Paul Wilkes (also known as Monty); and Kazumitsu Futatsuka in London have all joined the new venture, which is backed by private investors including Ospraie management's Dwight Anderson.
The company's metals and mining business incurred a loss of $20 million in the second quarter after it completed its exit from base metals business in North America and Europe, according to the group’s second-quarter financial report.
It would resize and rationalise its metals business to focus on the aluminium supply chain to regain profitability in 2016, the company previously said.
Noble's share price on the Singapore Exchange (SGX) was last at S$0.132 ($0.10) on Monday, unchanged from its Friday's close. It had sunk to S$0.122 on August 3, the lowest since 2003.
It will take time for Noble to restore confidence in its business model given negative operating cash flows, volatile profits and various credit agencies placing the company on negative outlooks, Singapore's DBS Vickers Securities said in a report this month.
Noble's focus on its liquidity position has constrained its ability to take advantage of opportunities and generate profits, DBS said in an August 12 report.
“Combined with costs associated with closing capital intensive or loss-making business, we expect Noble’s earnings to remain under pressure until at least the sale of Noble Americas Energy Solution,” the securities broker added.
Noble announced a few months ago the sale of its US energy retail arm, a $500-million rights issue and cost-cutting initiatives as part of plans to improve its liquidity.
Market conditions have become tougher for base metals traders - metals prices this year dipped to their lowest in several years, narrowing margins for these firms.
Previously, the commodities division of Goldman Sachs, J Aron & Company, scaled back its base metals business in China, intending to cut costs and exit non-core businesses.
(Additional reporting by Vivian Teo and Perrine Faye, editing by Vivian Teo)