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Slim pickings for prompt LNG cargoes to meet historic Feb Asia demand

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Slim pickings for prompt LNG cargoes to meet historic Feb Asia demand

Highlights

Platts MOC bids for H1 Feb deliveries surge past $30/MMbtu on Jan. 11

Fewer than 15 vessels for S Korea, Japan, N China early-Feb delivery

Japan's Day-Ahead power prices breach Yen 220/kWh or $618/MMBtu Jan. 12

Singapore — The scarcity of on-the-water LNG cargoes heading to Asia and a constriction in supply for loading in late January meant that buyers of prompt deliveries have been left with a dearth of options during the week of Jan. 12, according to industry participants and vessel-tracking data.

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This comes even as bids for early February deliveries surged past $30/MMBtu, leaving end-users across Northeast Asia grappling with low inventory due to a cold snap that has spiked heating demand and depleted inventories to critical levels.

LNG prices Asia - Platts LNG

On Jan. 11, Platts had assessed the JKM benchmark at $6.768/MMBtu, or 31% higher on the day, the most that the marker has ever risen in a single day, to $28.221/MMBtu, with competitive bids for February cargoes reported during the Platts Market on Close assessment process.

Trafigura reported a firm and transparent bid at $36.05/MMBtu for a Feb. 1-2 DES Incheon, South Korea cargo, as well as a second bid at $30.70/MMBtu for a Feb. 12-16 DES JKTC delivery.

However, industry sources and shipping data reveal a paucity of supply options for early February delivery due to congestion at the Panama Canal and ongoing production issues.

Among the vessels currently on the water and heading to South Korea, only LNG vessels the Sm Eagle, Long River Orashi and Rias Baixas Knutsen are most likely to arrive within the laycan that Trafigura had bid for, according to cFlow, Platts trade-flow software.

The Sm Eagle is a KOGAS chartered vessel which sailed from the US' Sabine Pass LNG terminal on Dec. 30 and is expected to arrive at South Korea's Tong Yeong terminal by Jan. 30, Platts cFlow showed.

Nigerian-chartered LNG vessel the Long River Orashi, which was at the Cape of Good Hope Jan. 12, had sailed from Bonny LNG terminal on Jan. 7 and is expected to arrive in Incheon, South Korea on Feb 1, Platts cFlow showed.

Spot LNG vessel the Rias Baixas Knutsen was chartered by Naturgy and had loaded from the Sabine Pass on Dec. 28. It is expected to reach Incheon on Feb. 4, but would have have to pick up speed from its current 18.5 knots in order to reach Incheon within Trafigura's Feb. 1-2 laycan.

LNG vessels the Cool Runner, which is scheduled to lift a cargo from Egypt's Idku LNG terminal on Jan. 13, and the LNG Kano, which is loading a cargo from Bonny LNG terminal, could reach Incheon by the Feb. 1-2 delivery window if it increases its speed from the usual average of 16 knots.

Cargoes loaded from the Sabine Pass, Bonny and Idku LNG terminal would also meet Trafigura's quality specifications, which was normalized 51 cents/MMBtu lower due to the later delivery window, final discharge country nominations, as well as limited discharge options.

Among other LNG cargoes on the water and scheduled to discharge in Japan, China and Taiwan, six are estimated to arrive at the Northern Chinese terminals and five at Japanese terminals over Jan. 31 to Feb. 4, Platts cFlow data showed.

However, bilateral negotiations may be required should these cargoes be sold into Trafigura's early February bid as the final discharge destination within JKTC is typically nominated within 30 days prior to delivery, market sources told Platts. This does not account for cargoes slated to load from Asia Pacific projects in the second half of the month and could deliver into north Asia by early-Feb.

Related content:

COLD SNAP FORCES UTILITIES TO BID UP FOR LNG

Meanwhile, the strong LNG demand remains unabated as utilities are widely reported to have bought spot cargoes at elevated levels.

On Jan. 8, Japan's Kyushu Electric was heard to have bought from ExxonMobil a H2 January delivery cargo loading from Australia's Gorgon LNG at close to mid-$30/MMBtu.

Prior to that, South Korea's KOGAS and Japan's JERA were reported to have bought cargoes in the bilateral market at high-$20s/MMBtu to low-$30s/MMBtu for H2 January to H1 February deliveries, several market sources said.

Traders told Platts that the urgency to procure cargoes for prompt delivery will likely continue if the prevailing cold snap persists throughout this month.

In Japan, utilities were facing a shortage of LNG and reducing power generation to mitigate blackouts as Day-Ahead power prices breached Yen 220/kWh, or $618/MMBtu, Jan. 12, the Japan Electric Power Exchange data showed.

Temperatures in Beijing were near minus 20 degrees C during the week of Jan. 9, lows not seen in over five decades. It became a challenge to discharge cargoes at some northern Chinese terminals such as Tianjin due to the formation of a thick layer of ice during the week of Jan. 16. The cost of LNG transported via trucks in China was heard to have surged to Yuan 10,000/mt, or $25/MMBtu.

A total of nine February-delivery JKTC LNG cargoes have changed hands so far during the Platts MOC assessment process. Prices have ranged from $10.30/MMBtu for Feb. 24-26 delivery to $21.70/MMBtu for Feb. 9-13 delivery.