China domestic LNG prices lose upward momentum on poor sales

10 December 2013 10:42 Source:ICIS News

SINGAPORE (ICIS)--Prices of China’s domestically-produced LNG are losing upward momentum as sales decline on tepid demand and higher-than-expected prices, industry sources said on Tuesday.

LNG demand from gas companies has not increased as piped gas supply was sufficient in most areas in China amid mild temperatures, a major LNG supplier based in northwest China said.

Therefore, some LNG producers are mainly selling LNG to the road transportation sector, the supplier said.

However, consumers in the vehicle-use LNG market were unwilling to accept higher-than-expected prices, the supplier said.

Similarly, rising LNG prices have dampened the buying interest of many end-users in south and north China, a separate LNG supplier based in south China said.

Purchases from many downstream users even declined during the winter consumption peak in December, the supplier said.

In order to boost sales, some traders chose to reduce prices.

The yuan (CNY) 6,250/tonne traded price of truck-delivered LNG in east China on 9 December was CNY17/tonne lower than the price on 2 December, ICIS C1 Energy assessments showed.

LNG demand from the industrial sector is expected to decline in January as production activities will be suspended during the New Year and Chinese Lunar New Year holidays in early and late January respectively, market sources said.

Therefore, domestic LNG producers may try to sell their stocks as soon as possible for fear of demand drop, the sources said.

Shaanxi Yanchang Petroleum (Group), for example, is considering reducing its LNG ex-works prices, added the sources.

The LNG prices may be supported if downstream demand increases along with a sudden decline in temperatures, a major LNG trader in east China said.

However, higher-than-expected LNG prices may again dampen downstream demand, added the trader.

Domestically produced LNG was traded CNY6,225/tonne on average for truck delivery on 9 December in the Pearl River Delta, a rise of 12% year on year, ICIS C1 assessments showed.

The price was CNY6,250/tonne ($1,030/tonne) in east China on 9 December, up by 18.5% over the same period in a year before, the assessments showed.

($1 = CNY6.07)

By Ricki Wang