June 2, 2017 / 7:06 AM / 3 months ago

INTERVIEW-Mitsui aims to expand LNG trading operation-executive

TOKYO, June 2 (Reuters) - Japan's Mitsui & Co Ltd plans to expand its liquefied natural gas (LNG) trading operation as demand for the cleaner fuel spurs more spot transactions in Asia, a senior executive told Reuters.

The move comes amid a big shift in the market in Asia, which takes in about 70 percent of global shipments of LNG, with traders and end users increasing their ability to trade in anticipation of a supply influx from Australian and U.S. projects.

Utilities such as Tokyo Gas and Kansai Electric Power that often tie up with Mitsui and other Japanese trading houses are expanding trading operations after winning more flexible terms on contracts, allowing them to resell excess cargoes, something unheard of only a few years ago. nL3N1HD1RA]

"We are going to reinforce our LNG team at our energy trading unit in Singapore as LNG spot trading is on the rise," Hiroyuki Kato, Executive Vice President of Mitsui & Co Ltd said in an interview on Thursday.

The unit has about 70 staff, mainly focusing on oil, but it will increase the number of LNG traders in the next few years from only a few now, Kato said, without giving details.

Around 260 million tonnes of LNG was shipped globally in 2016, according to the International Group of Liquefied Natural Gas Importers (GIIGNL). Spot trades, defined by GIIGNL as cargoes delivered within three months from the transaction date, totalled around 47 million tonnes, 15 percent higher than in 2015.

Japan takes in nearly a third of global shipments but in the last year China has emerged as a big importer. Kato says Mitsui is betting demand will surge as it did with iron ore, where the trading house has built up expertise.

Mitsui traded 2.8 million tonnes of LNG in the year ended March 31, but will receive more supplies from next year when the Cameron LNG project in Louisiana starts operations.

The Japanese company has signed up to take 4 million tonnes of LNG annually from the project, with some of it tied up in term contracts leaving it with volumes to trade.

"What has helped grow our iron ore operation was China's shopping spree. The same will likely happen for LNG, led by China, along with Southeast Asia and India," Kato said.

"If China switches 5 percent of its power sources to gas, it will boost LNG-equivalent demand by 80 million tonnes, the same as Japan's total imports."

China currently imported about 26 million tonnes of LNG in 2016, up by a third from a year earlier.

The company is also looking for buyers for supplies from an LNG project in Mozambique led by Anadarko in which Mitsui has a stake.

"Our aim is to win binding long-term commitments," Kato said.

On iron ore, he said prices have fallen too far, with Chinese futures for the steel making ingredient slumping to a six-month low on Thursday, down 40 percent from this year's peak.

"It has slightly overshot recently," Kato said, predicting that the iron ore market will become tighter from 2021-22 follwing the end of an expansion phase by miners, while China's crude steel output will keep climbing through 2025.

"Our iron ore business is making profits even at the current price, but we want to cut costs at mines further by adopting artificial intelligence and other technology," he said.

($1 = 111.1500 yen)

Reporting by Yuka Obayashi; Editing by Aaron Sheldrick and Richard Pullin

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