Weak demand foils attempt by China LNG producers to hike prices

16 July 2013 10:04  [Source: ICIS news]

SINGAPORE (ICIS)--Weak downstream demand has forced some Chinese producers of liquefied natural gas (LNG) to adjust their offers back down by yuan (CNY) 200-400/tonne ($33-65/tonne), market sources said on Tuesday.

On 8 July, these producers attempted to hike prices by that much ahead of the nationwide implementation of China’s gas pricing reform, which will effectively raise the production cost of LNG, they said. The reform took effect two days later.

Truck-delivered LNG prices in the spot market are currently so high that downstream consumers are unwilling to accept LNG volumes, traders said.

On 15 July, the average LNG price in China was CNY4,607/tonne EXW (ex-works), up by 21% from the same period last year, according to data compiled by ICIS C1 Energy.

End-users have started increasing their LNG imports as domestically produced volumes have lost their competitive pricing edge.

The daily truck-delivered sales of imported LNG in the eastern China spot market, for example, increased by 40-50% month on month in July to 70-80 trucks - each with a capacity to carry 20-30 tonnes of LNG - according to a trader.

Some imported LNG sold in Jiangsu province were even delivered to neighbouring Shandong province, further eroding the share of domestic LNG in the eastern China market, the trader said.

Inclement weather also played a role in preventing domestic LNG producers from delivering volumes to customers, industry sources said.

Heavy rains and landslide in some regions like Shaanxi province have disrupted transportation of LNG supply from plants operated by Shaanxi Lvyuan Natural Gas and Xi'an City Xilan Natural Gas Group, a northwest China-based LNG supplier said.

($1 = CNY6.14)

By: Jane Han

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