China's record power load fails to boost spot LNG buying amid high prices

China's power grids are straining under record-breaking demand, driven by sweltering summer heat and improved industrial activity, yet this surge has failed to boost spot LNG purchases, as high prices and alternative supplies continue to dampen appetite, according to trade and industry sources.

The power grid in Guangdong province, the main manufacturing hub and the largest power-consuming region of China, recorded a new peak load of 159.74 GW on July 7, reflecting a 1.94% increase over the province's previous high in 2024, the Guangdong Power Grid said.

This follows the National Energy Administration reporting a national record peak load of 1,465 GW on July 4, fueled by extreme temperatures and economic growth. This figure surpassed the 2024 high of 1,451 GW and was nearly 150 GW higher than the same period last year.

Grids in six provinces and regions -- Mengdong, Jiangsu, Anhui, Shandong, Henan and Hubei -- have also hit summer highs, the NEA said, warning that high temperatures persisting in northern, central and eastern regions through July 10 could push loads even higher.

Despite the intense cooling demand driving power consumption, spot LNG buying interest from Chinese importers remains notably absent, with many trade sources citing high prices as a significant barrier to purchases.

"The spot prices are too high to stimulate LNG demand," said a trade source in southern China. "If prices were closer to our target range of $11-$11.50/MMBtu, we would definitely see buyers emerging."

While city gas companies acknowledge increased demand, particularly for power generation, the current LNG price levels are deemed insufficient to trigger spot purchases. "If prices were within an acceptable range, there would definitely be buyers coming forward," another source said.

Platts, part of S&P Global Commodity Insights, assessed the August JKM at $12.619/MMBtu and the JKM September derivatives at $12.49/MMBtu on July 8.

Gas-for-power demand

The structural lack of profitability of gas-fired power generation remains a critical factor dampening interest in spot LNG purchases, despite rising power demand, industry sources indicated, noting that many gas-fired power plants operate on thin margins or incur losses for most of the year, making it challenging to absorb current LNG spot prices.

"Many gas-fired power plants in southern China rely on just a few months of operation throughout the year, while the rest of the time they often run at a loss or are idle, with minimal profits. Therefore, it is impossible for them to purchase spot LNG at the moment," another source from southern China explained.

These power plants are heavily reliant on existing contracted natural gas supplies, including both LNG and pipeline gas.

"They may also negotiate for incremental supplies with major domestic suppliers like CNOOC in the southern regions under pre-agreed terms," the source said, adding that CNOOC currently has sufficient natural gas/LNG supply.

Additionally, the rapid expansion of renewable energy is significantly reducing the need for marginal gas-fired generation, according to industry sources.

China's installed solar capacity surged 56.9% year over year to 1,080 GW, while wind power grew 23.1% to 570 GW. Together, renewables now account for 45.7% of total installed capacity, surpassing thermal power, according to data released by the National Development and Reform Commission.

"Power demand has increased; however, gas-fired power generation has not seen a significant boost due to sufficient supply from other generation fuels, particularly the availability of solar power during sunny days," a source in eastern China said this week.

Data from S&P Global Commodity Insights indicated that gas-fired generation utilization hours from January to May fell by 62 hours year over year.

Domestic supply

Furthermore, increased domestic gas production and rising pipeline imports, especially via the Power of Siberia link from Russia, are further displacing the need for spot LNG imports, industry sources noted.

JP Morgan also highlighted these factors in a recent report, describing Chinese LNG demand in 2025 as "remarkably weak."

Analysts and industry sources anticipate continued pressure on China's LNG imports in the near term, despite the seasonal demand spike.

JP Morgan forecasts a potential recovery in overall natural gas demand and LNG imports in the second half of 2025, up 11% year over year, driven by cooling and seasonal needs.

However, it still expects full-year 2025 LNG import volumes to decline by about 5% year over year to 101 Bcm, citing risks from strong renewables and potentially mild winter weather.