Chinese LNG demand emerges but with limited longevity

Chinese second-tier gas companies have emerged for spot LNG cargoes since late last week to buy summer supplies, breaking a long pause since 2021.

But buying interest will most likely remain opportunistic, as long as imported LNG prices continue to be more competitively priced than the country's other gas sources.

Chinese private-sector firm Jovo may have bought a first-half July cargo for delivery to state-owned PipeChina's 2mn t/yr Yuedong terminal at around $9-9.30/mn Btu earlier this week, market participants said, although others pointed out this level was considered relatively high. The firm last purchased a spot cargo from Angola LNG for loading across 22-27 January 2021 from its 5.2mn t/yr Soyo facility through a tender that closed on 21 December 2020.

Chinese gas distributor China Gas may have bought a July cargo around the same time as well, although details of the trade are still unclear.

Hong Kong-based Towngas was in the market to seek an end-July to early August cargo earlier this week, possibly buying somewhere below $9/mn Btu, participants said.

Chinese regional state-controlled city gas firm Shenzhen Gas may have sought an August delivery but may not have bought through its tender, likely because it could not secure a cargo at its target price level. This was followed by Shenzhen Energy that issued a tender to seek an August cargo on 31 May and may have bought anywhere around $9-9.50/mn Btu.

While Towngas has been mostly inactive in the international spot market, Shenzhen Energy had been prominent for some time. It was last in the market on 28 September 2021 with a tender seeking a November and December delivery for the same year.

Buying tracks price fall

The spate of tenders to buy emerging from China following the long break is also in line with a significant fall in prices. Chinese interest in spot supplies has emerged particularly as spot prices fell below $9/mn Btu.

The front half-month ANEA price, the Argus assessment for spot LNG deliveries to northeast Asia, fell below $9/mn Btu to $8.97/mn Btu on 29 May for the first time since 31 May 2021 when it was assessed at $8.77/mn Btu. This was also 60¢/mn Btu lower than the assessment a week earlier and $2.06/mn Btu lower than the assessment a month earlier.

Chinese spot interest was further spurred by imported LNG prices being at a significant discount to domestic trucked LNG prices. Argus last assessed Chinese LNG delivered trucked prices to Hebei, Jiangsu and Guangdong provinces at $10.62/mn Btu, $10.89/mn Btu and $12.18/mn Btu respectively, on 31 May.

But any price upside is also likely to be limited, participants said, despite the renewed interest in spot supplies from second-tier Chinese firms. This is mainly as demand from other northeast Asian buyers for summer supplies remained weak with higher than usual LNG inventories and ample supply availability in the Pacific basin. Any price increases from now on are also likely to drive Chinese second-tier buyers away from the spot market yet again, they added.

By Subethira Ahrumugam