Clyde Russell: LNG's Move to Structural Surplus Mirrors Iron Ore, Coal

This has led to a structural oversupply of both iron ore and coal, which is likely to persist for several years given the modest outlook for demand growth and the resilience of supply, even in the face of losses.

What is different for LNG is a stronger demand outlook over the longer term.

Unlike iron ore and coal, the Chinese authorities plan to boost the use of natural gas, whereas they want to lower the use of coal, and by extension iron ore, given the need for coal to turn the raw material into steel.

China's LNG imports rose 10.3 percent last year to 19.85 million tonnes, below some forecasts but still a reasonably strong outcome.

However, they are forecast to rise sharply in the coming years, with some estimates predicting China will consume more than 60 million tonnes of the super-chilled fuel by the end of next decade.

China plans to double its natural gas consumption to 400 billion cubic metres by 2020, and while some of this increase will be met from new pipelines from Russia and increasing domestic output, much will be sourced from LNG.

China has 37.1 million tonnes of re-gasification capacity and plans to add about 45 million tonnes more, so the country will have the ability to import more LNG.


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