September 17, 2015 / 10:56 AM / 4 years ago

Glencore vies with Trafigura, Vitol in thawing LNG market

* Glencore sees “spectacular growth” in LNG trading

* Trafigura, Vitol, Glencore, others to boost spot market volumes

* Glencore to double LNG trading team, trade up to 50 cargoes

By Jacob Gronholt-Pedersen

SINGAPORE, Sept 17 (Reuters) - Mining and trading giant Glencore is mounting a challenge to Trafigura and Vitol to become the top merchant trader of liquefied natural gas, as a market in which sales are largely frozen into decades-long contracts looks set to thaw.

Trafigura recently adopted tactics developed from years of trading oil to become the world’s top LNG merchant, investing in logistics and storage, while also providing credit and shouldering risk for buyers.

Glencore, on the other hand, plans to double its global LNG trading team and trade as many as 50 cargoes of the super-chilled fuel over the next year - almost twice what Trafigura traded in its fiscal year to Sept. 30, 2014.

LNG could soon surpass iron ore as the world’s second-biggest traded commodity, with estimates of the market’s worth ranging between $90 billion and $150 billion.

“The opportunity for growth in LNG trading is spectacular,” said Glencore’s global head of LNG, Gordon Waters, who joined in July after 18 years at BP.

Trading companies, which industry sources say have so far accounted for less than 10 percent of overall LNG trade, could help trigger a more liquid Asian LNG market, with exchanges from Singapore to Tokyo launching indices and futures contracts in preparation.

Waters was in a team at BP that took it from selling LNG via long-term contracts to being a key player in spot and short-term trade. “The idea is to do that all over again,” he told Reuters.

Glencore - which has had a limited presence in LNG up to this point - plans to trade some 40 to 50 cargoes on spot or short-term deals over the next year and double the size of its three-trader team based in Singapore, London and Madrid.

“Come back in 12 months, and I think you’ll notice a rapid growth,” Waters said.

Glencore’s planned volumes would be just under what some analysts say Trafigura could sell in the year to the end of this month, after the latter sold 1.7 million tonnes of spot LNG, or about 28 cargoes, the previous fiscal year.

Trafigura declined to provide further details in its volumes and market strategies.

Vitol says on its website it delivered over 1 million tonnes of LNG worldwide in 2014.

A Vitol spokeswoman declined to provide more details on its volumes, but said the trading house had been “at it years before anyone else, despite lots of noise in the last couple of years from Trafigura.”

GLENCORE TO TRADE ABOUT 5 PCT OF SPOT MARKET

Sudden oversupply and the development of financial derivatives have allowed “new species to emerge in LNG,” such as trading houses and banks, including his own, said Jogchum Brinksma, managing director at Citigroup Global Commodities, at this month’s World LNG Series in Singapore.

Other merchants trading LNG include Noble Group and Gunvor.

Glencore’s LNG plans come as the commodity market slump caused its share price to nosedive around 60 percent this year, forcing it to suspend dividends and sell new shares to cut its $30 billion debt pile.

With spot and short-term deals accounting for some 25-30 percent of the 260 million tonnes expected to be sold globally this year, Glencore’s share of the traded volumes, if it were to handle 50 cargoes, would be roughly 5 percent, according to calculations by Credit Suisse.

Energy consultancy Timera Energy estimates that there are more than 36 million tonnes of annual liquefaction capacity entering the LNG market across 2015-16, more than half of what the world’s top buyer Japan imports per year.

Asia’s LNG market is coming out of half a decade of tightness, and as output soars, merchants are sweeping up excess cargoes to trade to Asian utilities that are switching from long-term supply deals to do more spot trading.

Editing by Henning Gloystein and Tom Hogue

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