LNG stocks at Japan's main power utilities are steadily increasing ahead of the peak summer demand season, and the latest stocks already exceed 2024 levels.
The utilities held 2.26mn t of LNG inventories on 1 June, up by 4.6pc from a week earlier, according to a weekly survey by the trade and industry ministry Meti. This is higher by 1.3pc compared with 2.23mn t on 2 June 2024 and up by 7.6pc against 2.1mn t, the average end-June stocks over 2020-24.
Lower utilisation of gas-fired fleets to meet weaker electricity demand in the week to 1 June helped utilities increase LNG stocks. Gas-fed output averaged 22GW in the week to 1 June, down by 8.3pc from a week earlier, according to nationwide transmission system operator the Organisation for Cross-regional Co-ordination of Transmission Operators (Occto).
Reduced gas-fired generation came despite a 13pc weekly decline in base-load coal-fired output to an average of 18GW on 26 May-1 June. Oil-fed generation averaged at 158MW in the week, higher by 36pc from a week earlier.
Large parts of Japan experienced cooler-than-normal weather last week, which limited electricity use for cooling purposes. The country's power demand averaged 82GW over 26 May-1 June, down by 4.3pc from a week earlier, Occto data show.
Weaker power demand weighed on Japan's wholesale electricity prices and worsened generation economics for the country's thermal power plants, especially gas. Margins from a 58pc-efficient gas-fired plant running on oil-linked LNG averaged at -¥1.44/kWh (-$9.99/MWh) over 26 May-1 June. This is down from the average loss of -¥0.32/kWh a week earlier. The 58pc spark spread using spot LNG fell to an average loss of -¥2.20/kWh from -¥0.74/kWh a week earlier, based on the ANEA — the Argus assessment for spot LNG deliveries to northeast Asia.
Coal remained competitive in Japan's merit order. The dark spread of a 40pc-efficient coal-fired unit averaged at ¥1.99/kWh in the week to 1 June, despite a 38pc drop on the week, based on Argus' spot coal and freight assessments.
