China’s tight transport capacity to hit LNG sales at year end

05 November 2012 06:45  [Source: ICIS news]

SINGAPORE (ICIS)--The continuous shortage of China’s transport capacity for liquefied natural gas (LNG) delivery is expected to weigh on LNG sales from some domestic suppliers in late 2012, sources from several logistics companies said on Monday.

The country’s LNG transport capacity has been short since early September, when several provinces and regions adopted stricter traffic controls on heavy trucks and trucks carrying hazardous chemicals, the sources explained.

Accordingly, freight rates for LNG truck delivery have increased, which in turn limits LNG producers’ room to raise price, one of these sources said.

The shortage of transport capacity and higher freight rates are expected to downsize LNG trading flows from production bases in north and northwest China to downstream markets in coastal areas, the source added.

China’s LNG logistics market is expected to further tighten on the supply side in the near term, if LNG downstream demand grows in line with falling temperatures in the winter, as a significant increase in transport capacity is unlikely in the short term, the sources said.

The most efficient way for a capacity rise is to buy more LNG trucks.

However, logistics companies are cautious in buying new trucks because of costly financial inputs and a limited availability of truck drivers at the present, the source explained.

Meanwhile, “these companies are also concerned about their thin operating margins, as they barely gained any profits from LNG transportation during January-October”, the source added.

The tightness is expected to ease in early 2013 when LNG demand decreases along with warming weathers after the spring time in China. Therefore, freight rates are unlikely to climb significantly, the source said.


By: Jane Han



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