By Josephine Mason
NEW YORK, Dec 17 (Reuters) - Glencore's former No. 2 aluminum trader Matt Lucke has opened a physical metals trading firm, becoming the first high-profile alumni of the commodity trading giant's powerful metals business to return to the market since its takeover of Xstrata in May.
The 40-year old American told Reuters last week he has returned to trading just six months after leaving Glencore Xstrata Plc where he worked his way up over 17 years from the finance department to becoming one of the company's most senior aluminum executives.
His departure in the summer alongside global aluminum and alumina chief Gary Fegel was the biggest shake-up of the world's biggest aluminum trading desk in years.
The future of Glencore's senior executives who became paper millionaires following the firm's stock market listing in 2011 has been the focus of intense interest in the market.
Lucke said his new firm, ARG International based in Zug, Switzerland, will initially focus on aluminum and products along the supply chain, including bauxite, alumina, coke and caustic soda, which is used in the production of alumina.
He has started trading and has hired Rolf Rickenbacher, who also used to work at Glencore, to help run the company.
The two-man team will be up against Glencore's 200-strong global aluminum division, which has a foothold in aluminum markets from Brazil and Japan to China, and other established players including privately held Gerald Group and Trafigura AG .
His return comes at a tumultuous time for his former employer, U.S. banks with physical trading operations and the aluminum industry, which are reeling from a years-long controversy over warehousing at the London Metal Exchange that end users say has caused long wait times for metal and inflated physical prices.
Uncertainty over the impact of the changes on physical and LME prices as well as intense regulatory and legal scrutiny of bigger players in the 50-million-tonne aluminum market will "open up opportunities for small traders", Lucke told Reuters.
The wide forward price structure, with future prices higher than cash, low financing costs and weak benchmark LME prices are more favorable for smaller traders as they reduce the risks and costs of trading the metal.
There are also regional openings in major producing countries like Brazil, where high electricity prices have raised the cost of smelting.
His decision to go it alone also comes as competition from new entrants rises. Big energy merchants are looking to diversify into base metals and Asian-Pacific and South American banks are seeking to fill a vacuum left by European and U.S. banks which are retreating due to stiffer regulation.
BLAZING A TRAIL
Lucke abruptly departed Glencore in June after Chief Executive Ivan Glasenberg promoted alumina chief Andrew Caplan to replace Fegel as global head of both aluminum and alumina.
Glencore metals traders rarely strike out on their own after severing ties with the company that rewards fierce loyalty and long service.
Josef Bermann set up a non-ferrous trading firm almost ten years ago after leaving Glencore. This summer, he sold his stake in the company.
Other senior metal executives who have left Glencore as millionaires after the company went public in 2011 include former co-head of aluminum, Steven Blumgart, who left in January 2012, and global head of cobalt, Robert Franco, who also left this summer. Fegel's 1.2 percent stake in Glencore was worth almost $800 million when he left in May.