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China's trucked LNG price hits record high, Central Asian gas supply shrinks


Prices hit $25/MMBtu in some regions

Central Asian gas supply to China cut over 10%: sources

Post-Lunar New Year demand yet to fully recover

  • Author
  • Staff
  • Editor
  • Aastha Agnihotri
  • Commodity
  • Energy LNG Natural Gas Oil

China's trucked LNG prices hit a new record high recently -- breaching Yuan 8,500/mt ($1,339/mt), or the equivalent of nearly $25/MMBtu, in some northern and eastern regions -- driven by tighter LNG supply at first-tier suppliers, robust domestic demand and partial curtailment of Central Asian pipeline gas supply, according to market participants.

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China's overall trucked LNG price, for supply from both coastal LNG terminals and inland LNG plants, averaged Yuan 8,114/mt across the entire country on Feb. 22, which was also a new record high and up 79% from Jan. 28, the last trading day before the Lunar New Year holiday, data from Shanghai Petroleum and Natural Gas Exchange showed.

This surpassed the previous high when trucked LNG prices had touched Yuan 7,871/mt on Nov. 2, 2021, according to the SHPGX data.

State-owned PipeChina's Dalian and Tianjin LNG terminals in northeast and north China, PetroChina's Tangshan and Rudong LNG terminals and Sinopec's Tianjin and Qingdao LNG terminals in north and east China, all sold trucked LNG cargoes at around Yuan 8,500-8,650/mt on Feb. 22, up Yuan 1,200-1,700/mt, or 16%-24%, from a week earlier, and up 60%-70% from Jan. 29, data from domestic information energy provider JLC showed.

Pipeline gas shrinks

Affected by cold weather, natural gas supply from Central Asian pipelines to China have been cut by more than 10% recently due to increased domestic demand, a source close to PetroChina said.

As a result of lower pipeline gas supply from Central Asia, PetroChina has either curbed or suspended gas supply to some industrial and compressed natural gas (CNG) vehicle users since last week, in a bid to ensure natural gas supply to residential users, market sources said.

PetroChina's Natural Gas Sales Eastern Branch offered 3 million cubic meters of pipeline gas for delivery over Feb. 18-28 on SHPGX for auction late last week. The transaction was finally settled at Yuan 8.741/cu m on Feb. 18, which is equivalent to more than $34/MMBtu, even higher than spot LNG prices.

S&P Global Platts assessed the JKM benchmark price for LNG delivered to Northeast Asia in April at $24.171/MMBtu on Feb. 18, data showed.

Although the volume of pipeline gas sold via the auction on Feb. 18 was small, it was believed to have signaled tight pipeline gas supply in the market and encouraged other first-tier natural gas suppliers including LNG terminals to raise their prices for trucked LNG this week amid limited LNG arrivals, market sources noted.

LNG imports into China's LNG terminals were expected to fall 40% to 4.2-4.3 million mt in February from around 7.2 million mt in January, the JLC data showed.

However, higher prices have dampened buying interest, with limited trades heard at the record high price levels.

PipeChina's Tianjin LNG terminal only sold around 50 trucks of LNG on Feb. 21, compared to around 350 trucks on normal days, a trade source in Beijing said, noting that this situation has sustained for nearly a week.

Trucked LNG prices in northern China began to retreat slightly on Feb. 23 due to poor sales, with the actual traded price at around Yuan 8,300/mt, down from Yuan 8,500/mt the previous day, the source said.

Post-Lunar New Year demand surge

Cold weather since early February had stimulated gas demand and put pressure on first- and second-tier gas suppliers. These companies import LNG and redistribute it to downstream customers through pipelines or LNG trucks, with LNG trucks accounting for a large portion of the infrastructure due to inadequate pipeline networks.

With the gradual rebound of temperature in southern China starting Feb. 24, trucked LNG prices could lose some upward momentum, market sources said.

China's domestic gas demand rose rapidly when companies and factories resumed operations after the Lunar New Year holiday and this is yet to pick up pace as the post-holiday rush continued, when migrant workers leave their hometowns to return to their workplace cities.

Japanese bank Nomura estimated that 58% of migrant workers returned to their workplace cities as of Feb. 17, which is 4.4 percentage points slower than pre-pandemic years. However, according to the Ministry of Transport, total passenger trips via major modes of transport, from Feb. 7 to 17, was 14.5% above the same period in 2021 but still 66.4% below the corresponding period in 2019, the bank said.

Nomura said the Baidu Migration Index, which collects location data from smartphones, suggests the overall return rate of migrant workers to workplace cities right after the Lunar New Year holiday this year was meaningfully higher than that of last year.

Constrained manufacturing capacity during the Winter Olympics, fiscal easing measures and COVID-19 controls in cities like Suzhou, where some technology companies shut factory complexes to meet containment requirements, will also impact gas demand in the coming months.