March 27, 2019 / 12:15 PM / 23 days ago

HIGHLIGHTS-Top trading houses speak at commodities conference

(Adds Cutifani palladium comment)

LAUSANNE, Switzerland, March 27 (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.

MARK CUTIFANI, CEO, ANGLO AMERICAN

“Conditions are being set up for the next boom. That’s a consequence of better discipline in the industry.”

“We are likely to see some consolidation, but doing something on an aggressive basis is difficult.”

“Switching from palladium to platinum (in vehicle catalysts) at this point in time is not worth the effort in terms of paperwork and administration. As new models are developed, adjustments will take place.”

Cutifani said palladium, whose price hit record highs this month, was a “bubble”.

“We’ve cut our costs by 43 percent, which means we’re a different investment proposition to where we were five years ago. We can deliver dividends and growth over the long term.”

A buyback remains an option, he said.

PABLO GALANTE ESCOBAR, HEAD OF LNG, VITOL

“There will be some supply shutdowns, the (LNG) market now is incredibly oversupplied. We had record imports of LNG into Europe. Three years ago we saw 63 cargoes in one month, in March we see 125 cargoes, April and May we expect 150 and 170 cargoes... This is is really unprecedented.”

“We said before that we expect a battle between U.S. LNG and Russian (gas) pipelines. We believe that is happening now but it is being joined by LNG from the Middle East and Africa that is not finding homes in Pakistan, Bangladesh or China, where the winter was mild but there are other factors, such as excess production.”

HIROKI SATO, CHIEF LNG TRANSACTIONS OFFICER, JERA

It takes almost five years after FID (final investment decision) to the start of the project. There has been a lack of (LNG) FIDs in recent years.

He expects more than 100 million tonnes of LNG capacity will get FIDs this year and next. These are mostly greenfield projects. “2024/2025 is a kind of black box, in terms of which direction the market will go”.

The cycle in the (LNG) market is getting shorter. It was a 10 year cycle, then a three-year cycle. The shorter cycle means it is becoming a commodity, he said.

JUSTINE RYAN, GLOBAL DIRECTOR, GE RENEWABLE ENERGY

“What we’re seeing is a 2:1 ratio of installation across renewable versus conventional generation. From an investment point of view, that would be about $200-$300 billion a year on renewables.”

“There is a need for sustainable electricity. From our point of view, that’s where we put our investment.”

PAUL GRAVES, CHIEF EXECUTIVE, LIVENT CORP

“We are in a phase in the EV transition (where we are) moving away from policy-driven growth to consumer-driven growth.”

“More cars will be launched as...the OEMs (auto industry) turn their attention to creating consumer excitement. We’ll get a bigger wave of adoption of electric vehicles - the process hasn’t stagnated at all.”

CHRISTOPHE SALMON, CHIEF FINANCIAL OFFICER, TRAFIGURA

“What is over now is easy margins... margins that were based in the old days on asymmetrical information. Now prices are more transparent. It’s all about diversification.”

On Saudi Aramco’s entry into global oil trading:

“The driver is for them (Saudis) to capture the margin downstream, but one of the trends in the sector is much higher barriers to entry than 15-20 years ago.”

“Capital requirements are higher, you need to have an IT system set up in terms of global presence, the ability to attract talent with the right incentives, a risk management culture. So today, it would be much more difficult to create a new Vitol.”

DANIEL HINES, CFO, CASTLETON COMMODITIES

“I would add (on the Saudi entry to trading) that the move will increase liquidity, which is a good thing for the market. It’s not just competition... The Saudis certainly have some advantages but the actual set-up of a trading operation doesn’t happen overnight. (There is) no guarantee that it would be successful.”

MICHAEL BARTON, PORTFOLIO MANAGER, ORION RESOURCES PARTNERS

“There has been a malaise over the natural resources sector in general. Gold has been particularly hard hit.”

“What a lot of people have missed is the trend away from active management to passive management. There has been a two-thirds reduction in the number of active money managers in the mining sector in the last eight years.”

“You need active money to keep funding private placements and IPOs to feed the pipeline of new gold projects.”

“If the market comes back and shareholders of major companies want them to buy, there’s very little around, because nothing has come through the pipeline.”

RICHARD HORROCKS-TAYLOR, GLOBAL HEAD OF METALS AND MINING, STANDARD CHARTERED

“Gold equities’ performance has been poor and investors have been putting their money into streaming companies.”

“We’ve also seen a big move away from active management in the sector towards passive funds.”

“The Canadian market historically has been a core market for gold equities. That market, particularly at the junior end of the spectrum, has been distracted by marijuana and by other investments.” (Reporting by Pratima Desai and Julia Payne; Editing by Jan Harvey/Louise Heavens/Susan Fenton)

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