Monday, December 22, 2008

Noble founder Richard Elman turns scrap into gold

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Tom Miles and Nao Nakanishi, Reuters
HONG KONG -- In an office full of modern Chinese paintings overlooking Hong Kong's Victoria Harbor, Richard Elman, founder and head of Asia's largest commodities supplier Noble Group, says he has been lucky.
Elman, who began his career in a scrap yard in England at the age of 15, is among the few non-Chinese listed by Forbes magazine as the wealthiest in town.
"I've just been lucky...being in the right place at the right time," Elman said, adding he has always believed in fate.
Noble, which he set up 21 years ago with his savings of US$100,000, is capitalised at around US$4.8 billion.
It supplies raw materials from coal, iron ore to coffee, chartering more than 100 ships at any given time. Its assets stretch from iron ore reserves in Brazil and ports in Argentina, to coal mines in Indonesia and soy crushers in China.
Fuelled by surging demand from Asian countries such as China and India, Noble's net profit spiralled to US$258 million by 2007, rising more than 10-fold since 2000.
"I never had any great ambition. I did it for fun, because I enjoyed it, and to make a living. That's what I still do," he told Reuters on Friday, sipping his tea, relaxed in an open white shirt with beige Chinese bead bracelets dangling from his arm.
Elman, 67, said nobody knew much about commodities when Noble was established. The company moved its stock listing in 1997 to Singapore from Hong Kong, where they felt they had not been understood and appreciated.
"We started in the years when nobody even talked about commodities," he said. "We built the company during years of disinvestment, very tough years."
Noble has expanded through economic downturns, taking over a series of companies in financial difficulties such as Andre & Cie SA from Switzerland, once one of the world's top five grains traders with a history of more than a hundred years, earlier this decade.
Noble prides itself on building pipelines from production to consumption, controlling and profiting from every link in the supply chain of raw materials, including ships and warehouses.
"At the beginning we could sit with two telephones and make a living. But over the years that disappeared," he said. "We don't have to actually own the assets but to secure more long-term marketing rights we bought some assets."
Elman said he hoped Noble would be larger and more professional in five years. It already employs more than 10,000 people and has over 100 offices in 40 countries."The company has grown about 20 percent every year in physical volume," he said. "For us to increase physical capacity gives us the ability to work with very tight margins."
Combining its business and geographical presence, the company is expanding rapidly into new businesses, such as biofuels and carbon credits. It had a market share of 28 percent in certified emission rights to the carbon credit market last year.
Despite Noble's growing ethanol business, Elman said he was not fully convinced about biofuels, which many countries have promoted with generous subsidies.
"I am selectively convinced," he said. "Ethanol works in Brazil. There's no question about it. (But) if you look closely at biofuels around the world, it often has its challenges."
With global food prices soaring, prompting riots in some countries, the biofuels industry has come under growing criticism as it eats up corn, sugar cane, rapeseed, soy and palm oil.
One area of potential expansion is uranium, which has seen prices soar to historic highs in the past five years, due to a nuclear power renaissance in the face of energy shortages and global warming caused by greenhouse gas emissions.
"I think the future energy requirements of the world will come from nuclear," he said. "We'd start with (uranium) mining...if they're the right price, we'll pursue them."
Elman said Noble would look at each opportunity and there was no shortage of offers coming its way, even though some of the easier targets had already been taken.
"There's consolidation in all these industries. We live off the crumbs of the big boys, which could develop into loaves of bread."
As a teenager in the 1950s, Elman started out sorting non-ferrous scrap metal after dropping out from school in London. His barrister father and his mother, who made women's clothes, got him his lucky break into the business.
He first landed in Hong Kong in 1968 as a metal merchant for a U.S. company. Following a stint in New York, he returned to Hong Kong to set up his own company after leaving Phibro, now part of Citigroup Corp.
Elman moved commodities in and out of China in the 1970s, when it was ruled by Chairman Mao Zedong. He was the first to sell China's Daqing crude oil to the United States.
"That was a place you could make a lot of money. You had one customer for everything," he said. "So it was very easy, and volume was enormous because they were buying for a country."
Asked about the key for success, Elman said: "Don't forget where you came from. Don't forget your origins. Don't forget you're fallible. Respect people, trust people."
Within Noble, Elman likened his role to a music conductor, pointing to a portrait of Herbert von Karajan, a renowned conductor of the last century, behind his desk.
Recalling a TV programme on the conductor, Elman said: "It occurred to me that this guy was a huge disciplinarian, but he managed to create beautiful music because he got everybody playing together."
Asked about his pastime, Elman, father of four and grandfather of two, said: "Not very much, apart from spending time with my family."
Yet pointing to model cars on the shelf, he said: "I like to watch motor racing. We sponsor some cars at the Macau Grand Prix. But I don't drive (racing cars). They drive too fast for me."

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