From your vantage point in the commodities world, how do you see the whole soft versus hard landing story in China?
The trend that is in place is still a positive one in terms of China's demand and offtake. It is driven by need. Maybe the slope will change, and we won't see such a severe rise in demand - but the trend is still very positive. That's not to say we won't have interim volatility.
In late April-May we saw a slowdown of industrial raw materials into China, such as iron ore. But we are now back on track and freight rates are back up. So, the slope of the curve is again positive.
You still feel that China continues to be a major driver of the commodities cycle?
I do, and I like to use the term "centre of the plate". China is the centre of the plate in terms of price discovery and drivers of basic raw material prices and freight values. China is extremely important not only in determining absolute price levels but relative price levels. If China decides to put an internal cap on coal prices, will that effect the amount that is exported out of China? Or will thermal coal stay at home? That ends up having a direct impact on the price paid for coal in Japanese and Korean power stations.
China and India are still growing at a brisk pace. Is this a long-term bullish story for commodities investors?
Our belief is that there will be a sustained period of higher commodities prices. We had a deflationary period for commodities over the past 15 years and that provided a disincentive to produce capacity for basic raw materials. Most commodity markets are operating from very low inventory levels and so if you have a big pocket of demand like China you create a huge updraft in price that's likely to last for several years.
Is China a major component driving steel prices?
Sure. We had a bit of a lapse in steel prices during late April and May, but now we are back to fairly solid steels prices - especially for the products used in civil construction and infrastructure.
What's your outlook for the global economy in the wake of rising interest rates and the US election. Are you still long term bullish about prospects for 2005?
If you put catastrophic events aside, we still have a fairly robust environment for continued economic growth - inside and outside of Asia. The slope of the growth curve is going to be less severe than it has been for the past 12 months, but the trend line is still definitely positive.
You just released your first half results which showed a nearly six-fold rise in profit over the same period last year to $126 million. Is this directly correlated with the bullish performance of commodities?
The main drivers are the diversity of businesses and geographies that make up Noble today which allow us to capitalize on business, even when it is not China-focused; and that's what you've seen come to bear on our results.
Our business has seen a steady growth that started towards the latter half of 2003.
We have been helped by the growth in commodities, the growth in their price and our broad-based product line. We have been able to capitalize on the very strong demand for thermal coal, US demand for aluminum, and we've been able to capitalize on our presence in Russia and Europe on the steel sourcing side. We have also been able to capitalize for example, on our presence in the coffee market in Vietnam and the rice market in Thailand. We have a broad spectrum of businesses.
