ANALYST VIEW: Plummeting Japanese LNG storage lifts demand prospects for shoulder season

• Reversal of hitherto strong power demand trend anticipated in April
• Nuclear availability forecast higher by double-digit percentage points in Q2
• Coal-to-gas switching to have more limited effect compared to last yearSINGAPORE (ICIS)–A cold end to winter has pushed LNG stocks below average, indicating restocking demand of about 0.9m tonnes of LNG during the shoulder season.

This is assuming power utilities aim to reach a similar inventory as last year before the cooling season starts in late June.

Weak short-term demand will likely ease the restocking efforts as warmer weather in April sets in and nuclear availability remains strong.

WEATHER OUTLOOK

While the weather impact recedes into the shoulder season, current data still shows power consumption spiking on heating demand for the fifth consecutive week as of 28 March.

However, the bullish trend should quickly reverse, as above-average temperatures are forecast to take hold before the end of the month.

POWER DEMAND

With March ’24 turning into one of the coldest in recent years, power demand has remained significantly higher compared both to last year and the 2018-22 average for more than four weeks.

Demand in the week ended 24 March was up 17% year on year and 5% above the 2018-22 average. A similar trend was seen in the first half of the current week but should shift before the weekend.

STORAGE

LNG storage for power generation has been falling for four straight weeks, reaching 1.52m tonnes on 24 March.

This is down by 0.8m tonnes from 26 March 2023 and 0.1m tonnes from 27 March 2022. It is also well below the 2018-22 average for the end of March: 2.14m tonnes.

NUCLEAR

Kansai Electric’s 1180MW Ohi 3 and 870MW Takahama 4 is returning from regular maintenance on 7 and 26 April.

The latter outage was extended by three weeks because of damage to the steam generator. In Kyushu, the 1180MW Genkai 4 went offline for maintenance on 27 March and is scheduled to resume on 3 June.

Nuclear generation is forecast higher by over 10% year on year through Q2 ’24, but only 2% higher in July and 8% lower in August. This is assuming a mid-month startup of Chugoku Electric’s 820MW Shimane 2, which remains unconfirmed.

Japanese utility Tokyo Electric Power (TEPCO) applied for regulator approval to load nuclear fuel into reactor No. 7 at its Kashiwazaki-Kariwa power station starting 15 April, the company said in a 28 March news release. The company also requires a nod from the Niigata prefecture.

COAL

Coal plant availability is lower year on year for a sixth consecutive month and is expected to remain weak in April.

JERA’s 1070MW Taketoyo 5 is still offline with no view on restart date after a fire incident occurred on 31 January.

However, coal-fired generation is forecast slightly higher year on year, reflecting the unusually narrow price spread between Japanese LNG and coal imports in Q2 ’23, which favoured gas-fired generation for its greater thermal efficiency.