March 26, 2019 / 9:33 AM / 5 months ago

HIGHLIGHTS-Top trading houses speak at commodities conference

LAUSANNE, Switzerland, March 26 (Reuters) - Executives from the world’s largest trading houses and mining companies are this week discussing market trends at the FT Commodities Global Summit in Lausanne, Switzerland.

GLENCORE AGRICULTURE CEO CHRIS MAHONEY

“It would be quite tough for us to embark on a course where we go downstream, be that refining or bottling. If you had billions of dollars it might be possible.”

“I still believe the industry requires consolidation and M&A activity.”

“Investment in individual pieces of value added is not going to tackle the problem of too much fragmentation, too much capacity, too much handling capacity and too much crushing capacity.”

Mahoney said it was difficult to benefit from the volatility of the U.S.-China trade war and hard to maintain a position because the situation could return to normal.

WEIR GROUP CEO JON STANTON

Weir is expanding its mining equipment business because that is where it sees growth potential.

“Our oil and gas business is an upstream business focussed on the Permian Basin in the U.S.”

“Our view of peak oil (demand growth) is 20/30 years ahead, it will probably plateau for quite a bit after.”

“It’s about focussing our portfolio and getting out of downstream areas and power generation, which are more challenging.”

RIO TINTO CFO JAKOB STAUSHOLM

Rio Tinto can only manage a couple of greenfield projects at any one time.

“Rio Tinto is a big company, but actually we cannot open too many greenfield mines at the same time. There are normally quite a few years between greenfield investments.”

MERCURIA CEO MARCO DUNAND

“An estimated $1 trillion has been invested in U.S. shale... We are actually funding a lot of shale industry, the small to mid producers. We can see the capital requirement is enormous. There is not enough cash return because the decline rate is quite high, so you have to keep reinvesting.”

He added that it has started drilling in shale assets in Argentina.

GUNVOR CEO TORBJORN TORNQVIST

“I like to think of evolution rather than revolution. We are spending a lot of resources developing our natural gas and LNG businesses. In any realistic scenario for cleaner fuel, you can’t bypass gas.”

Tornqvist added that Gunvor had also made investments in biofuel plants.

VITOL CEO RUSSELL HARDY

“I think that trend (to cleaner fuel) is obvious to us as well. 80 percent of our business is in the traditional space, people will continue to use cars and use hydrocarbons. 20 percent of our business is batteries, power, LNG biofuels and this will grow in importance as the years go by.”

GLENCORE HEAD OF OIL ALEX BEARD

“The commodity transition is a multi-generational shift, in the short term, I think really the rise of gas and LNG is a substantial part of that scenario.”

“Paris (climate talks) is clearly a very important message to the industry as a whole, I don’t think there is one single trigger.”

“The fourth quarter took most people by surprise. The market was expecting a strong stance on Iranian oil ... but the U.S. administration was a lot more liberal in granting waivers than the industry expected.”

Beard does not expect to see consolidation in the trading sector in the next three years.

“The volatility and energy transition, in terms of can the market cope with that, the answer is a resounding yes.”

“You could cannibalise each other’s business without taking their people, for that reason I don’t think consolidation is likely.”

TRAFIGURA CEO JEREMY WEIR

“A peak in oil demand is very difficult to predict, there are many different influences here, it might happen quicker than you think.”

“That being said, we see a plateauing out or reduced demand growth rate from 2025 onwards and possibly a decline from 2030/2035.”

Reporting by Pratima Desai and Julia Payne; editing by Louise Heavens and Alexander Smith

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