Swiss group Glencore to enter Japan LNG market

TOKYO -- Glencore Xstrata plans to start supplying LNG to Japanese utilities this year, the Nikkei reported.

The firm will use Morgan Stanley traders in London and Singapore to handle LNG purchases, and also assign personnel to Tokyo. The staff will be expanded if necessary.

LNG is traded under either long-term contracts that can span more than two decades or short term contracts of four years or less. Glencore will focus on short-term spot trading, which will allow it to flexibly switch customers based on prices and increase earnings.

The company currently sells steam coal to utilities and coking coal to steelmakers in Japan. Annual trading volume is about 35 million tons, or around 20% of the Japanese market. The firm will utilize its existing sales network for LNG distribution.

Demand for LNG in Japan is rising as many nuclear power plants remain idle after the March 2011 earthquake. Power companies are planning to increase imports from the United States and Russia in the medium term to secure stable supplies while curbing costs.

With the Japanese market expanding, resources firms worldwide are stepping up sales of LNG in Japan. Britain's BG Group Plc set up a Japanese branch early this year. And oil companies including BP Plc are also boosting sales.

Such advances by foreign firms could increase spot trading and spur competition among suppliers, potentially lowering fuel costs for power companies.