China’s summer power push, higher LNG demand outlook

China’s energy regulator expects tight power supply in summer

Yunnan province drought and hot weather could lead to higher LNG demand

Focus on China’s economy recovery

SINGAPORE (ICIS)-China’s National Energy Administration (NEA) expects that power demand will rise rapidly and the maximum power load will increase by more than 100GW this summer compared to the previous year, it said in a press conference on 29 April.

High power demand could further support LNG imports to support gas-fired generation – China’s April LNG imports were already the highest on record for that month, ICIS data shows.

The NEA expects tight power supply during the summer, especially in some areas of the eastern, central, southern and southwestern provinces and Inner Mongolia.

The pressure on power markets could become more acute if more extreme heatwaves occur, the NEA added.

To secure energy and power supply, China’s government will accelerate the construction of coal power plants and put them into operation before the peak demand periods of summer and winter.

This comes after a relatively comfortable winter where coal and gas stocks were not heavily drawn down.

The State Council has urged the NEA to increase inspections of power transmission lines in forests to prevent large-scale outages.

Several forest fires in Sichuan and Guizhou provinces occurred in early 2024, causing large-scale power transmission line closures.

FOCUS ON YUNNAN

Yunnan province, one of the major hydro-electric power producers in China, has been experiencing severe drought since last winter.

This has cut hydropower generation which plays a vital role in the power supply of Guangdong province, and will likely lead to a rise in gas demand for power generation.

Guangdong province is the biggest gas-for-power customer in China.

The China Meteorological Administration (CMA) assessed that Yunnan province is still experiencing severe-to-extreme drought levels on 30 April.

The CMA forecasts 0.5-1.5°C hotter-than-average weather from June to August except in some small areas of central China with forecasts slightly below average.

China’s spot LNG demand would likely increase if the drought in Yunnan province extends into a particularly hot summer.

But Chinese buyers do not expect spot demand to increase in the short term as downstream demand remains sluggish over the shoulder months, sources said.

China’s overall LNG imports in April reached 6.7m tonnes, a record high for the month, underpinned by high contractual supply.

ECONOMIC RECOVERY

China’s economy has shown some signs of improvement with policy support since the start of 2024.

China’s first-quarter GDP stood at $4.1 trillion, up by 5.3% year on year, National Bureau of Statistics (NBS) data showed on 17 April.

But NBS also released the April Purchasing Manufacturers’ Index on 30 April which stood at 50.4, down from 50.8 the previous month.

The manufacturing industry faltered again even though it held above 50 points which still means some expansion.

China’s economic recovery will require more policy stimulus amid a weak property market, sources said.