Northern China LNG prices may soften after recent uptrend

30 March 2017 06:47 Source:ICIS News

SINGAPORE (ICIS)--Liquefied natural gas (LNG) prices in northern parts of China may soften in the near term following the uptrend that lasted through March on the back of strong demand from the industrial sector, industry sources said on Wednesday.

The uptrend in March persisted despite the end of the peak heating season, they said.

Prices of LNG may soften after April due to increased supply in the market with the start-up of LNG plants in Shandong and Shanxi, as well as Guanghui Energy’s LNG terminal in Jiangsu, according to traders and end-users in northern China.

On 29 March, spot prices of LNG were assessed at yuan (CNY) 3,825/tonne delivered (DEL) Shandong, up by CNY675/tonne or 21% from one year ago, according to data compiled by China editorial team at ICIS.

LNG prices rose by 18% year on year to CNY3,450/tonne DEL Hebei over the same period, the data showed.

Higher-than-usual gas prices have placed end-users under great cost pressure.

Domestic LNG prices usually retreat following the traditional demand peak for heating, which lasts from November to February, they said.

Strong demand from the industrial sector has been a key driver for the robustness in LNG prices, market players said.

Moreover, an increasing number of producers and industrial parks deemed to emit high levels of pollution in He’nan, Hebei and Shandong have switched their feedstock from coal to gas in response to the state government’s call for environmental protection.

Reduced run rates at LNG plants have also tightened domestic supply, therefore keeping the prices firm, they said.

Large LNG producers in Shaanxi, for example, have been running their plants at less than 80% of capacity after the heating demand peak, they added.

Ex-works (EXW) prices in Inner Mongolia, Shaanxi and Shanxi were around CNY300-400/tonne higher than the same period last year, a north China-based trader said.

Moreover, increased freight rates amid tight transport capacity also contributed to the firmness in domestic LNG prices.

Quite a few LNG trucks were eliminated from the market during the first half of 2016 owing to the sluggishness of the industry, logistics providers added.

Picture: LNG Gas Terminal in Rovigo, Italy (AGF s.r.l./REX/Shutterstock)

Focus article by Joyce Zhang
By Joyce Zhang