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China's Unipec awards major buy tender for LNG cargoes with JKM cash premiums


Unipec heard bought about 11 cargoes for winter season in 2023

Winter JKM cash premiums remain significant

Other Chinese buyers remain inactive

  • Author
  • Melody Li    Atsuko Kawasaki    Ying Ting Lew    Suyash Pande
  • Editor
  • James Leech
  • Commodity
  • LNG Natural Gas

Unipec, a trading arm of Chinese national oil company Sinopec, purchased at least 23 LNG cargoes via a major buy tender that closed on Sept. 15, with winter volumes heard secured at average cash premiums of 10-30 cents/MMBtu to the corresponding JKM pricing periods, according to multiple industry sources.

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The sources told S&P Global Commodity Insights that Unipec had secured one cargo for October, five for November, at least five for December, as well as at least one cargo per month for 2024 delivery. This was largely in line with the initial volume requirements for the tender.

For November cargoes, the average price for the five delivery windows stood at a premium of about 10 cents per MMBtu to the average November JKM, the benchmark price for spot LNG in Asia. Meanwhile, for December cargoes, the average awarded price carried a premium of about 20 plus cents per MMBtu to the December JKM average for varying delivery periods across the month.

Unipec wasn't immediately available for comment on the matter.

Suppliers were heard to include a Chinese LNG major, a global portfolio supplier, a Middle Eastern producer, a European utility trading arm and a Swiss trading house.

Other Chinese LNG buyers were closely monitoring winter demand for the Chinese market, with expectations that year-end downstream demand for gas would remain weak -- unless there is an unusually cold winter.

High inventory levels and unfavorable profit margins were problems that both power generators and industrial users have to contend with, according to various Chinese buyers.

"There is a consensus that if price spikes were to occur, they would most likely manifest in February 2024," a Chinese importer said.

As a result, at least two Chinese buyers have been heard to have requested deferments to the delivery of their October and November shipments to the subsequent year due to weak demand.

Japan, a significant player in the northeast Asia LNG market, currently appears to be relatively subdued, with limited indications of buying interest.

South Korean buyers were also heard to be taking a cautious approach, with private buyers and state-owned Kogas keeping watch on near-term spot price direction, especially against the backdrop of ongoing industrial action in western Australia.