Robust Chinese Demand Ensures Asian LNG Rally Has Legs



Robust Chinese Demand Ensures Asian LNG Rally Has Legs
China could overtake South Korea as the world's second-biggest LNG importer this year.

Reuters

LONDON/SINGAPORE, Sept 29 (Reuters) - Unexpectedly strong demand from China, along with rising oil and coal prices, should keep Asian liquefied natural gas (LNG) spot levels buoyant this winter.

Despite rising supplies from new plants, spot prices have risen by 55 percent from their 2017 lows to $8.40 per million British thermal units (mmBtu) as Asian buyers also refilled summer stocks.

With the peak demand October-March winter gas season almost underway, further price gains are expected.

Nuclear outages in Taiwan and rising demand from Thailand, as well as new buyers like Pakistan, are absorbing oversupply of LNG faster than expected, traders and analysts said.

Andrew Walker, vice president of strategy at U.S. LNG exporter Cheniere, said there was "very strong growth in China this year," adding that demand from Japan and South Korea was also robust.

Still, while Asian LNG prices are likely to keep rising, the pace could moderate as traders say healthy stock levels and more nuclear, coal and renewable generation in top buyers Japan and South Korea could cap their winter demand.

"A lot of factors are coming together, which means the market has stayed more balanced than people expected," Walker told Reuters during an industry event in South Korea.

Higher coal prices have contributed to low power station stocks across India and China, prolonging LNG demand in countries typically unwilling to pay much above $7 per mmBtu, according to one analyst.

Gail India, Gujarat State Petroleum Corporation and Reliance Industries are all seeking winter supply.

Oil prices near two-year highs are also helping lift spot LNG demand as buyers choose between 20-year, oil-indexed LNG supply or spot cargoes, whichever is cheaper.

CHINA BUYING SPREE

As in previous winters, Chinese imports - up 44 percent over the January-August period from a year earlier - are dictating Asian price trends.

Under a drive to improve air quality by switching away from coal, China could overtake South Korea as the world's second-biggest LNG importer this year if current trends continue, import data shows.

Strong growth in Chinese LNG demand could be partly offset, though, by greater availability of piped gas supply from Central Asia this winter, potentially limiting price spikes on international gas markets.


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