* Trafigura, Goldman Sachs, Noble interested in the deal * Financing may be difficult for smaller bidders * Nyrstar still negotiating end of deal with Glencore By Silvia Antonioli and Melanie Burton NEW YORK/SINGAPORE, March 5 (Reuters) - More than ten firms have approached Nyrstar hoping to secure the exclusive rights to a portion of the world's largest zinc producer's output worth an estimated $700 million a year, sources said. While official negotiations over the offtake have not yet started, commodity traders Trafigura, CWT Ltd.'s MRI and Louis Dreyfus said they are interested in bidding for the deal which includes 350,000 tonnes a year of Nyrstar's European zinc production. ] That equates to 3 percent of world refined output. Traders Traxys and Noble Group Ltd and banks with physical trading desks, Goldman Sachs & Co., Deutsche Bank AG and JP Morgan Chase & Co. are also among the interested parties, according to market sources. The lucrative deal will be up for grabs because Glencore , the current holder, has agreed to scrap its agreement, which it signed in 2008, and sell its 7.8 percent stake in Nyrstar, worth more than $70 million at current prices, in return for EU approval for its $34 billion takeover of Xstrata . Official talks will not start until Glencore and Nyrstar find an agreement to end the offtake deal. Glencore now awaits Chinese regulatory go ahead with the Xstrata takeover, which it expect to complete by April 16. But the relatively rare chance to snare a sizeable chunk of supply has bidders lining up. Some analysts expect the market for zinc, mainly used to protect steel from corrosion, will tighten in the next few years as construction picks up in the United States and China. Some major mines are also due to close. "More than 10 firms have approached Nyrstar. All industry players and banks with ambitions in the metals sector are interested in this offtake," a source close to Nyrstar said. Analysts estimated Glencore and Xstrata together would control about 50 percent of the European zinc metal market, but giving up the Nyrstar offtake will reduce their market share by almost 18 percent, according to a Reuters calculation. A spokesman for Nyrstar, which produced over 1 million tonnes of zinc in 2012, said it was in discussions with a broad range of interested parties, but declined to comment further. Traxys and Noble were not immediately available for comment while JP Morgan, Deutsche Bank and Goldman Sachs declined to comment. COMPETITION HEATS UP On paper, Swiss-based commodity giant Trafigura is considered the front runner in the race for the deal. It has a big physical market presence, hefty financial clout and warehouses in which to store metal. Traxys is seen by many as a natural fit, because it has historical links with Nyrstar. The New York-headquartered firm was formed in 2003 by a merger between Umicore's trade arm Sogem and Considar. Four years later, Umicore's zinc operations were tied with Zinifex to create Nyrstar. Many question whether the company has a large enough balance sheet to be able to secure this deal though. U.S. industrial group Koch, and Vitol and Mercuria, two energy-focused giants with ambitions in metals, also have an interest in the offtake, according to market sources. "It's an interesting deal for the trading companies that aspire to be named in the same breath as Glencore. All of the sudden it gets you on the map," a source at one of the bidders said. Vitol would not comment while Koch and Mercuria were not available for comment. As the tender process approaches though, competition is heating up. "Everyone salivates when a deal like this becomes available. The message we got (from Nyrstar) is it'll be a while before anything's done," said a source at an interested bank.