13 August 2012 09:46 [Source: ICIS news]
The average margin that LNG traders can earn declined to yuan (CNY) 50/tonne ($8/tonne) between January and July, a drop of around 67% from CNY150/tonne in 2011, the traders said.
The arbitrage window for moving LNG from north China-based plants to consumers in south
The increasingly fierce competition meant that many producers have chosen to build their own distribution channels, including LNG-refuelling stations, re-gasification plants and logistic facilities such as LNG trucks, to boost revenue. More producers have also been dealing in direct sales with end-users, instead of relying solely on LNG traders, causing them to have declining margins.
Ningxia Hanas New Energy Group, which started up
“Having a large customer base is the key to surviving,” a major LNG supplier based in north
More than two years ago, producers in
However, the Chinese market has been in oversupply since 2011, with the rapid capacity expansion of many plants.
The rise in direct sales between producers and end-users have made it challenging for traders to do arbitraging as there is greater price transparency in the market, industry sources said.
“Some producers offer the same price to both end-users and traders, which further crushes the margins,” a LNG trader based in north
To increase their margins, some traders are trying to extend their businesses through partnership with LNG producers or building their own LNG plants, market sources said.
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