Major China LNG producers cut prices to destock

07 September 2012 07:01  [Source: ICIS news]

SINGAPORE (ICIS)--Several major liquefied natural gas (LNG) producers based in northwest China have reduced prices as they are under pressure from high inventory levels, market sources said on Friday.

In northwest China, the verage LNG prices fell by yuan (CNY) 39/tonne ($6/tonne) to CNY3,451/tonne EXW (ex-work) in the week ending 7 September, according to data compiled by C1 Energy, an ICIS service in China.

Shaanxi Yanchang Petroleum (Group), for example, offered its LNG lower at CNY3,500/tonne on 7 September, versus CNY3,650/tonne on 3 September.

Chinese LNG producers have been saddled with high levels of inventories since end-August, as supply rises amid soft demand, market sources said.

Daily LNG supply in northwest China has risen by about 900,000 cubic metres since the beginning of September, the sources said.

China Natural Gas Corp started LNG supply from its 2m cubic metre/day Ansai plant from 31 August, and Shaanxi Zhongyuan Green Energy and Ningxia Hanas New Energy raised their utilisation rates, which all led to growth in supply in the region, market sources said.

However, downstream demand remained lacklustre in China.

“Some cargoes are lying in trucks for several days looking for buyers – something seldom seen in this industry,” according to an LNG trader based in south China’s Guangdong province.

“The Chinese LNG market is likely to remain in oversupply, a northwest China-based LNG supplier said.

“Downstream demand may not increase significantly, although heating demand from households will grow in winter,” the supplier said,

LNG supply will be boosted with more plants coming on stream later this year, the supplier said.

Northwest China is a major LNG supplying region in China.

($1 = CNY6.34)

By: Jane Han

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