China faces LNG supply test amid Middle East crisis, spot price increase

Disruption to LNG supply from the Middle East will test key buyers of LNG from the region, including Chinese importers, with spot LNG prices having soared, according to Chinese market participants and analysts.

According to Lu Xiao, research director for China Gas and LNG at S&P Global Energy, while Chinese buyers may see the short-term impacts as manageable, thanks in part to seasonal demand declines and cargoes already en route, a sustained disruption could fundamentally reshape China's long-term energy security calculus.

Spot LNG prices have soared since the US and Israel launched their joint strikes against Iran on Feb. 28.

Platts, part of S&P Global Energy, assessed JKM -- the benchmark price reflecting LNG delivered to Northeast Asia -- on March 3 at $25.39/MMBtu, up from $10.70/MMBtu on Feb. 27.

In 2025, China's LNG imports from Qatar and the UAE accounted for some 30% of its total LNG imports, according to S&P Global Energy data.

But given that China also has access to pipeline gas imports from Russia and Central Asia, and domestic gas production, the imports from Qatar and the UAE represent only around 6% of overall gas supply.

With an average shipping time of 19 days, LNG cargoes already en route are expected to arrive into China through the first half of March, Lu said, with the impact set to be felt for cargoes scheduled for late March and April.

A complete halt would require six replacement cargoes for a one-week disruption, 26 for a month, and 78 for three months, Lu said.

But the timing of the incident -- near the end of the winter heating season -- provides a crucial buffer, with demand set to decline seasonally. If deliveries can resume within two weeks, the material impact on China's supply will be minimal, Lu added.

In China's domestic market, trucked LNG prices from both coastal import LNG terminals and inland LNG plants rose as supply concerns and recovering post-holiday demand boosted sentiment, according to market participants.

State-owned and private LNG plants raised ex-plant prices by Yuan 100-260/mt across key regions, while CNOOC and other importers increased posted prices by Yuan 100-200/mt in major coastal markets, data from domestic information providers showed.

Buyer caution

Market participants said they expect prices to remain firm in the short term as geopolitical risk continues to support bullish sentiment, and Chinese buyers remain cautious.

Trade sources at Chinese state-owned energy companies told Platts that, for now, supply remains manageable, and there is little immediate interest in spot cargoes given the high price environment.

If the disruption persists, companies are considering measures such as raising prices to control sales, increasing domestic gas output, boosting pipeline imports, and using more coal and renewables to bridge supply gaps, they said.

"We will not consider spot purchases for the time being due to poor economics," a trade source with one state-owned Chinese energy companies said, but added that the possibility of spot purchases in the future cannot be ruled out, as supply security remains the top priority.

"Everyone, including us, is just keeping an eye on how things play out," said a second state-owned energy company trade source. "We'll probably have a better idea in about a week, since it's still early days with the war just starting."

Meanwhile, a third industry source noted that demand is still muted in China post-Lunar New Year holiday, and pipeline and Russian LNG supply remain sufficient for now.

Business activity in China has only gradually resumed following the nine-day Lunar New Year holidays, which began Feb. 15 and ended Feb. 23. Many factories did not restart operations until after the Lantern Festival, which falls on March 3 this year.

China's Ministry of Foreign Affairs spokesperson Mao Ning called for an immediate end to military actions in the region at a March 2 press conference, emphasizing the importance of keeping the Strait of Hormuz open for global energy trade and economic stability, according to a press release posted on the ministry's official website.