China’s LNG arbitrage drop on rising competition from imports

15 April 2013 08:28  [Source: ICIS news]

SINGAPORE (ICIS)--China’s liquefied natural gas (LNG) arbitrage from the northern regions to the east and south areas has been declining since early April as a result of steep competition from imported volumes, market sources said on Monday.

China National Offshore Corp (CNOOC) has reduced its April spot offers by yuan (CNY) 400/tonne ($64.52/tonne) from the terminals in Fujian’s Putian, Zhejiang’s Ningbo and Guangdong’s Dapeng to boost sales because of its high inventories, they said. CNOOC is one of China’s top LNG importers.

As a result of the lower offers, daily LNG spot sales from the three terminals increased by 74% from late March to 3.81 million cubic metres (mcm) on 12 April, according to data compiled by ICIS C1 Energy.

The rise in purchasing activity for LNG imports weakened the demand for domestically produced LNG, forcing local producers to cut their prices as well, a northwest China-based LNG supplier said.  

Many China’s LNG plants are located in the northern region to enjoy cost advantages, because most of the country’s gasfields are there. However, the main LNG consumption areas are in the highly industrialised east and south regions.

The average delivered (DEL) prices of spot LNG by trucks declined by CNY175.50/tonne and CNY274.50/tonne from three weeks ago to CNY4,750-4,933/tonne and CNY5,217-5,400/tonne on 12 April in east and south China respectively, ICIS data showed.

Meanwhile, freight rates for LNG truck delivery decreased by CNY0.01-0.02/tonne per kilometre, because the lower LNG arbitrage resulted in reduced demand for such trucks, many logistics company sources said.

A number of trucks were even left idle amid the weakening domestic LNG logistics market, the sources added.

($1 = CNY6.20)

By: Jane Han

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