Glencore sues Jamaican group over contract award

Glencore is suing a Jamaican state-owned company after it awarded a lucrative contract to one of the trader's rivals.

Clarendon Alumina Production, which is owned by the Jamaican government, in June awarded a 12-year alumina supply deal to Hong Kong-based Noble Group, unseating Glencore from a trading relationship it had held for decades.

The London-listed trading house responded last month by commencing legal action in Jamaican and English courts seeking to restrict CAP's deliveries to Noble, according to a filing last week at the US Securities and Exchange Commission by the Jamaican government.

Glencore alleges that the deal with Noble will prevent CAP from delivering alumina it still owes to Glencore, according to the filing.

Jamaica has the world's fifth-largest reserves of bauxite, the raw material that is processed into alumina and then aluminium, a metal used in everything from fizzy drinks cans to aircraft.

But CAP, whose main asset is a 45 per cent stake in a bauxite and alumina company, has struggled amid low prices and high energy costs, making it a burden on Jamaica, one of the world's most indebted countries.

As part of an IMF rescue package in April, the government agreed to end its financial support for CAP, by either selling or leasing it by the end of this year.

Noble will pay $120m under the deal struck in June in exchange for the alumina supply contract, receiving as security an option to buy CAP at market value.

Glencore had been vying to do a similar deal, but at less favourable terms than Noble's offer, according to a statement from the Jamaican ministry of energy and mining.

According to the SEC filing, Glencore last month filed an application in a Jamaican court seeking to restrict CAP's alumina shipments to Noble, and a claim in an English court seeking damages. Last month CAP obtained a discharge of an interim injunction that had been issued in Jamaica.

The first delivery under the contract with Noble took place last week, according to mining minister Phillip Paulwell, who said he was "pleased and confident that it represented Jamaica's best interest".

Glencore declined to comment.

Glencore's involvement in the Jamaican bauxite and alumina industry dates back several decades, when the company's founder Marc Rich established its position in the country. However, the trader's most recent contracts with CAP in 2000 and 2002 committed the Jamaican group to sell its alumina below global market prices and below CAP's costs, according to a government report.

For Noble, the deal marks a boost to its position in the global alumina market. After an initial ramp-up period, the offtake deal will cover about 600,000 tonnes a year of alumina, according to a person familiar with the terms. That represents a small but significant share of the freely-traded alumina market contested by trading houses, which executives estimated at about 10m-20m tonnes a year.

"Noble is pleased to have been able to partner with the government of Jamaica to work together on opportunities to establish the Jamaican bauxite and alumina industry as the industry leader it can be," said Mark Hansen, head of metals at Noble.

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