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Spotlight: Chinese LNG demand disappoints to the downside, warning sign for prices


Chinese import demand down 30 mil cu m/d over last month, first time since 2016

Prices rising, netbacks falling, rising shipping rates masking underlying fundamental weakness

Any Chinese weakness immediately adds to burden on Europe to balance global market

We have long considered China to be a fast-moving secular demand growth story amid aggressive clean air policies supporting a shift from coal to gas for heating. This story appears to have hit a speed bump. As we highlighted in recent scorecards in August and September, we foresaw some of this risk building thanks to economic slowdown.

Economic risks, combined with unsupportive weather in the north, has been weighing on import demand into China and putting prices at risk. Recent import levels, particularly into central China, account for nearly all the weakness -– over the last month down 35 million cu m/d year on year. Meanwhile, imports into northern and southern China are relatively flat year on year, leaving overall import levels lower year on year for the first time since 2016.

For the moment, rising shipping rates are masking underlying weakness for JKM LNG prices. The best evidence is that even though spot JKM has gone up $0.80/MMBtu over the last month, netbacks from the US Gulf Coast have fallen $0.30/MMBtu -- effectively putting the burden on producers to take on the transportation costs rather than the consumer, even though we are moving deeper into the winter.

Platts Analytics has gone into the winter forecasting China to consume 10% of the winter-on-winter growth in supply. Given limited market flexibility in Asia, this will put an increasing burden on European LNG consumption and supply-side production management. Either way, these developments are very bearish JKM, which agrees with our market forecasts.

The major risk to the upside is either unseasonably cold weather or if China takes advantage of the low prices to aggressively shift more regions to gas from coal heating.

For more Spotlight research published by S&P Global Platts Analytics go to

-- Josh Zwass,

-- Edited by Jonathan Fox,