China’s falling LNG supply weighs on demand for delivery trucks

21 May 2013 09:13  [Source: ICIS news]

SINGAPORE (ICIS)--China’s demand for trucks making long-distance liquefied natural gas (LNG) deliveries has been declining because of lower domestic production and rising imports, market sources said on Tuesday.

Production in the northern region has been decreasing since late April, because of several plant shutdowns, resulting in weaker demand for trucks delivering LNG cargoes from the north to the south, industry sources said.

Domestic LNG production is centred in the northern region, as the majority of the gas fields are based there, while LNG consumption centres are located in the industrialised southern and eastern regions.

The north-to-south arbitrage window is open most of the time, because imported cargoes are usually more expensive compared with local product.

China’s domestic LNG supply aggregated 14.09 million cubic metres (mcm) on 20 May, a drop of 8.9% or 1.38mcm from a month ago, according to data compiled by ICIS C1 Energy.

The rising supplies of imported LNG have squeezed the market share of domestic LNG in the south and east China markets.

The supplies of imported LNG in the spot market went up by 23% month on month to 4.86mcm on 20 May, ICIS C1 data showed.

As a result of the weak demand for domestic LNG, trucks are even left idle in certain areas, according to a source.

“There are at least one third of LNG tank trucks [that were] in service being left idle,” an east China-based logistics operator said.

Freight rate was at yuan (CNY) 0.70-0.72/tonne ($0.11-0.12/tonne) per km on 20 May for transport distances above 2,000km from north China, down by CNY0.015/tonne per km month on month, ICIS C1 data showed.

“Logistics companies are also facing the pressure of lower freight rates, in line with falling fuel costs,” the operator said.

Most LNG tank trucks in service are fuelled by gasoil and the average price of zero-pour-point gasoil was CNY0.26/litre lower than a month ago, market sources said.

Domestic LNG supplies are expected to continue falling in the near term, as many LNG producers in the north are planning to conduct maintenance for their plants in late May.

“Freight rates for LNG truck delivery are likely to decline in late May [as a result],” a north China-based logistics company source said.

($1 = CNY6.13)

By: Francie Liu
+65 6780 4327

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