Southern China trucked LNG prices surge to summer high of Yuan 6,000/mt

Trucked LNG prices in southern China, including Guangdong and Fujian provinces, have surged to around Yuan 6,000/mt ($527.66/mt) in the last couple of weeks, a record high for the summer season, mainly driven by skyrocketing Asian spot LNG prices as well as strong demand in the region, domestic trade sources said.

Peak summer trucked LNG prices in southern China are usually in the range of Yuan 3,000/mt to Yuan 3,500/mt, several Chinese traders said, noting that the last significant price surge in summer was seen three years ago in 2018, when it rose to around Yuan 4,500/mt.

"Trucked LNG prices in the Pearl River Delta breached Yuan 5,500/mt in early August, and further climbed up to around Yuan 6,000/mt by mid-August, mainly boosted by soaring Asian spot LNG prices over mid-July to early August," a trade source with one of China's major city gas distributors in Shenzhen said, but declined to be named.

"We expect the [trucked LNG] price to rise further in September, led by the big three state-owned oil giants [PetroChina, CNOOC and Sinopec]," the trader said, noting that LNG importers would have to raise domestic trucked LNG prices to pass on higher import costs.

Meanwhile, a trading source with a second city gas distributor in the region said China's trucked LNG price might hover around the current level for a while in September, given easing domestic demand in the past month as summer temperatures cooled due to rains.

"The sky-high LNG price has scared off buying interest from some trading houses," the source said, but also noted that demand for trucked LNG has also come from end users in recent months. At least two city gas distributors in south China said that their sales volume dropped by around 10% in August due to the surge in trucked LNG prices.

JKM, the benchmark price for spot LNG in northeast Asia, touched $17/MMBtu in early August, up from around $13/MMbtu in mid-July, implying the cost for September-delivery LNG cargoes could be as high as Yuan 6,000/mt, S&P Global Platts data and calculations showed.

Besides, stronger gas demand from southern China this summer also underpinned the jump of local trucked LNG prices, market sources noted, including from power generation.

Power consumption in southern China's Guangdong province topped the other provinces in the country and reached 364.3 billion kWh in the first half of the year, up by 22.89% year on year, data from state-owned Assets Supervision and Administration Commission showed.

The installed capacity of gas-fired power plants in Guangdong was about 28.38 GW at the end of 2020, according to local government data, which accounts for around 29% of the country's total natural gas installed capacity of 98.02 GW, Platts calculations based on data from CNPC Economics and Technology Research Institute showed.

In addition, pipeline natural gas transportation volume in Guangdong province surged by 76% year on year in the first half of 2021, which was also a record increase, data from state-owned infrastructure giant PipeChina showed in early July, indicating robust natural gas demand.

Although JKM retreated a bit to around $15/MMBtu on Aug. 20, it gained upward momentum again last week and rebounded to around $18.6/MMBtu this week, which is equivalent to around Yuan 6,300-6,400/mt after adding taxes and fee, according to Platts data and calculations. Spot LNG prices are also supported by Hurricane Ida in the US and stronger European gas prices.