Glencore's rivals salivate over antitrust offer When Ivan Glasenberg decided to pursue a merger of Glencore with Xstrata, it was probably not his intention to make Claude Dauphin's day. But Mr Dauphin, chief executive of Trafigura, could soon be celebrating an early Christmas present from his arch rival. The merger between Glencore and Xstrata has opened up one of the best opportunities in years for other traders to gain market share in zinc. The zinc market is traditionally a Glencore stronghold - according to the trading house's listing prospectus it controlled 60 per cent of the so-called "third party" market in the metal. But that may soon change. After the European Commission expressed concern about Glencore and Xstrata's combined market share in the European zinc market, Glencore has offered to break an offtake contract with Nyrstar, the world's largest zinc smelter. IN The Commodities note The deal covers about 600,000-650,000 tonnes of zinc each year, according to industry executives - equivalent to almost a quarter of the third party market that is contested by traders such as Glencore and Trafigura. Glencore's rivals are therefore salivating at the prospect of the deal coming up for grabs: telephones were said to be ringing off the hook on Wednesday in Nyrstar's commercial department. Trafigura is the obvious candidate to take on the contract. It has the second-largest zinc book after Glencore, and was upset to have been snubbed when Nyrstar first agreed the deal with Glencore in 2008, according to people familiar with the matter. Traders said that few other companies would have the logistical capabilities, balance sheet and global reach to take over the deal. "The list of potential counterparties to take this on globally would be quite limited," says Duncan Hobbs, analyst at Macquarie. Other possible candidates include Traxys, the private equity-backed US trading house, as well as traders that are trying to gain a foothold in the zinc metal market such as Louis Dreyfus Commodities and MRI Trading, controlled by Singapore-listed CWT. It is unclear exactly what will be up for grabs, however. Glencore has proposed to the European Commission that it would break the offtake deal only in Europe, which accounts for about 350,000 tonnes of annual sales, people familiar with the proposal said. The trader is likely to be keen to maintain its control over Nyrstar's output from Clarksville in Tennessee, within reach of London Metal Exchange warehouses owned by Glencore in New Orleans, as well as from Port Pirie in Australia, which also sells lead to Glencore. However, modifying the offtake contract would require Nyrstar's agreement, and may require Glencore to pay a fee. And other traders may insist on taking Nyrstar's non-European output in addition to its European metal. Nyrstar could conceivably decide to sell its metal direct to consumers, cutting out the middlemen. But that is less likely, as it would need to rebuild its marketing team, which Macquarie analysts estimate would add about €5m to Nyrstar's costs. The obvious solution, therefore, would be to replace Glencore's offtake deal with a similar contract with another trading house - such as Trafigura. Mr Dauphin, who ran the lead and zinc department of Glencore's predecessor Marc Rich + Co in the 1980s before founding Trafigura, must be delighted. The Commodities Note is a daily online commentary on the industry from the Financial Times