Impact on LNG fundamentals limited from recent Fukushima earthquake: sources

Singapore — There will be minimal market impact on LNG supply and demand fundamentals, as well as spot prices, with multiple Japanese thermal power plants restarting following the temporary shutdown due to the earthquake on Feb. 13, several sources told S&P Global Platts on Feb. 16.

The magnitude 7.3 earthquake offshore Fukushima prefecture resulted in a shutdown of combined 6.867 GW at 13 coal and gas-fired power plants in the northeastern Japan, according to Platts calculations based on information by the Ministry of Economy, Trade, and Industry.

However, with restarts of thermal power plants such as the Shin Sendai gas-fired power units, the region has secured 13.7 GW of supply capacity returning early in the week starting Feb. 14.

Initially, some discharge procedures of LNG carriers were expected to be delayed as LNG terminal operators took precautionary measures to assess the safety of their infrastructure.

"There was no vessel planned to enter [our] port so there is also no need for requesting delay in ETA", a Japanese LNG terminal operator noted.

One LNG producer concurred, saying that they have not yet received any requests for cargo delays later in the week.

"A delay of three or four days for discharge is not uncommon in the LNG market", a Japanese importer said and added, "We are monitoring the situation at our terminals, but this shouldn't have a major impact on futures discharges".

While another Japanese importer noted that there may be some drop in LNG consumption due to power generation units taken offline, the impact would be minimal as a speedy recovery is expected once safety inspections of the LNG terminal finish.

In the wider LNG market, demand for spot LNG remains muted as most utilities based in western Japan, South Korea and China take a wait-and-see approach as they expect prices to continue a downward trend.

"We see many cargoes for March and April. Prices should gradually come off as peak winter demand weakens, just like it usually does every year", another LNG producer said.

Another Japanese importer said, "there is no doubt that Japanese gas utilities including us will have low inventory for the remainder of February but we don't have to buy additional LNG cargoes in the spot market as winter is ending soon."

"There are many sellers offering us cargoes especially for late March and early April - they seem to be in a hurry to sell before prices fall," a previously mentioned Japanese importer said.

A Japanese city gas utility also agreed, noting that they would rather purchase a spot cargo in May or June when prices of LNG spot cargo is expected to be much lower.

Platts assessed March 2021 JKM physical average at $8.264/MMBtu. In 2019, the monthly average prices for JKM May, June and July arrival were assessed at $2.795/MMBtu, $2.107/MMBtu, and $2.063/MMBtu, respectively.