Chinese LNG Demand: July-August 2022

Wednesday, 14 September 2022
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China’s monthly LNG offtake in August amounted to 4.69mmt, our data showed, which constituted negative monthly demand growth of 0.27mmt (-5 percent) compared to the 4.96mmt we recorded in July. Nevertheless, at 9.65mmt in total, Chinese demand during the reporting period of July and August led its equivalent of 9.43mmt marginally by 0.22mmt (2 percent) during the preceding two-month period of May and June.

China’s LNG imports in May and June stood at 4.94mmt and 4.49mmt, respectively. Rather marginal growth notwithstanding, the demand increase period-on-period in July/August constituted a departure from the slide seen since last winter. Offtakes had at times plummeted by more than 5mmt period-on-period following high demand growth during December/January. Accordingly, China’s annualised LNG import capacity during the reporting period stood at roughly 64 percent, up 1pp from around 63 percent for the previous reporting period of May-June. However, the amount imported during the reporting period still constituted a significant net decrease of 2.54mmt (-21 percent) from the 12.19mmt we recorded during the July-August period of 2021, which is reflective of the extremely tight market and commensurate high prices in the Far East as well as subdued demand due to ongoing lockdown measures.

Prices

Our data on Chinese gas prices suggest the marginal period-on-period demand growth was at least partially due to the prevailing high price environment in the Far East, with landed LNG costing briefly as much as 49.33/MMBtu in August, according to our calculations based on Chinese customs data. Chinese LNG prices during the reporting period were reflective of the increased competition by European buyers following Russia’s stop to pipeline gas supplies to most EEA states. Additionally, parts of China continued to be subject to intermittent coronavirus-related lockdowns, which dampened domestic energy demand growth. These measures reigned in domestic LNG prices but had little impact on the high levels of landed prices, Chinese customs data for the current reporting period indicate. The Pacific market continued to be tight and spot cargoes still demanded a steep premium as Thailand, for example, maintained high buying activity, our data showed. Instead, the Chinese market saw a widening price gap between landed and domestically sold LNG, which likely further slowed demand growth.

Chinese domestic LNG prices continued to shift downwards during the reporting period following their peak of US$27/mmBtu in March. In the current reporting period of July/August, the highest privately quoted domestic price had already decreased to US$21.51/mmBtu on 11 August before climbing down further to around US$17/mmBtu by the end of the month. For the reporting period overall, the upper and lower price bounds thus remained with a relatively narrow range of less than US$5/mmBtu at around US$4.60/MMBtu. For reference, prices’ upper and lower bounds saw a gap of US$14.83 in February/March. The current reporting period’s maximum price stood at US$21.51/mmBtu whilst the floor constituted US$16.89/mmBtu. In May/June the maximum price stood at US$23.53/mmBtu with a floor of US$20.08/mmBtu.

Meanwhile, the average domestic price indicated by the National Bureau of Statistics (CNBS) stood at US$19.07/mmBtu in July (the most recent available full-month dataset by the CNBS), which represents a decrease of US$0.66/mmBtu (-3 percent) from US$19.73/mmBtu in June.

Landed LNG prices exceed their previous peak of around US$40.38/mmBtu in w/c 6 December last year as they climbed from US$26.04/MMBtu in July to US$49.33/mmBtu between 22 and 26 August, according to our c alculations based on Chinese customs data. Notably, landed prices had begun to plummet during the last three days of August and stood at US$20.68/mmBtu at the time of writing.

North China

LNG demand continued to see a substantial decrease in the north of China during the reporting period, our data indicated at the time of writing, decreasing by 0.32mmt (-13 percent) from 2.53mmt in the two months of May-June to 2.21mmt for the reporting period of July-August. The largest share of LNG influx into the region during the reporting period took place via the Qingdao LNG terminal. The sum of LNG imports of 2.52mmt in northern China for the period of July-August this year was also behind its equivalent of 3.40mmt in 2021, down by 1.19mmt (-35 percent).

China’s North led by Qingdao LNG 
Leading the roster of northern terminals by volumes imported, Qingdao LNG took in 0.84mmt during the reporting period of July- August. This constituted an offtake increase of 0.28mmt (50 percent) from 0.56mmt in the previous two-month period. Imports consisted predominantly of four Australian cargoes from Australia Pacific LNG and Queensland Curtis L NG amounting to 0.33mmt. Papua New Guinea also delivered four cargoes, supplying 0.29mmt. In addition, Qatar’s Ras Laffan LNG c omplex delivered two cargoes totalling 0.15mmt whilst Indonesia delivered 0.07mmt to the terminal in July/August.

Tianjin - Nangang LNG 
Imports at Tianjin - Nangang LNG were the second highest in northern China, even as they decreased by 0.12mmt (-13 percent) to 0.82mmt in July-August from 0.94mmt in May-June, according to our data. The bulk of imports came from the Australia Pacific LNG plant, amounting to 0.55mmt via seven cargoes. The roster of Tianjin – Nangang’s imports was completed by a cargo each from Russia’s Sakhalin-2 LNG, Qatar’s Ras Laffan facility, Damietta SEGAS in Egypt and Calcasieu Pass in the United States. These four shipments amounted to 0.27mmt.

Tianjin LNG 
Tianjin LNG, meanwhile, had offtakes amounting to 0.27mmt over the reporting period compared to 0.36mmt in May-June. The terminal thus saw a decrease in imports of 0.09mmt (-25 percent). Cargoes from the Pacific Basin comprised one each from Malaysia LNG and Australia Pacific LNG and totalled 0.14mmt. In the Middle East, only Qatar exported to Tianjin LNG in July/August, shipping 0.06mmt via the Umm Bab. A single Atlantic Basin shipment of 0.07mmt, meanwhile, came from an EG LNG shipment aboard the Kool Orca.

Caofeidian LNG and Dalian LNG
The remaining two northern terminals – Caofeidian LNG and Dalian LNG – imported 0.21mmt and 0.07mmt over the reporting period, respectively, which in the case of Caofeidian LNG stemmed predominantly from Qatar with 0.13mmt. A 0.04mmt shipment from Australia’s Wheatstone LNG constituted Pacific Basin supply. Atlantic supply, meanwhile, came in the form of a single cargo of 0.03mmt via the Sabine Pass LNG-derived Clean Planet.

July-August supply to the Dalian terminal came solely from Russia’s Yamal LNG via the Northern Sea Route through the delivery of 0.07mmt aboard the Georgiy Brusilov.

East China

At the time of writing, demand in East China was dominated by the wider Shanghai area, where Jiangsu LNG imported 1.25mmt during the reporting period. This placed the terminal second among China’s leading terminals in July-August. Accordingly, it operated at well above-nameplate capacity. Overall LNG demand in East China had increased by 0.32mmt (11 percent) to 3.23mmt in July/August from 2.91mmt recorded in May-June.

Wider Shanghai area 
The remaining wider Shanghai area – comprising Qidong LNG, Shanghai LNG and the metropolis’ peak-shaving facility – imported a total of 0.82mmt over the reporting period, up drastically by 0.55mmt (204 percent) from the 0.27mmt recorded in May-June. The sub-region’s imports were led by the Shanghai LNG terminal, which took in 0.62mmt and thereby grew imports by 0.35mmt (230 percent) period-on-period. Shanghai’s peak-shaving facility reappeared in the market with imports of 0.12mmt. The facility saw no imports in May-June. The Qidong LNG terminal was also seen in the market again with an import of 0.08mmt, our data showed.

Zhejiang & Zhoushan LNG 
At neighbouring terminals Zhejiang and Zhoushan LNG, imports amounted to 1.09mmt and 0.07mmt, respectively. Although Zhejiang L NG thus showed the third-highest level of imports during the reporting period, its offtakes remained broadly flat compared to May-June. Meanwhile, Zhoushan LNG slashed imports by 0.26mmt (-18 percent) to 0.07mmt from 0.33mmt. LNG to Zhejiang LNG was mainly supplied by Australia, with Queensland Curtis LNG delivering six cargoes totalling 0.41mmt whilst Gorgon LNG supplied one shipment of 0.07mmt. Qatar’s Ras Laffan also supplied 0.42mmt via five cargoes alongside a shipment each from Yamal LNG, Sakhalin-2 LNG and Brunei LNG amounting to 0.19mmt. Zhoushan’s single import of 0.07mmt came from Wheatstone in Australia. The terminal is one of the few Chinese LNG import terminals not controlled by one of the state-owned petrochemical giants PetroChina, Sinopec and CNOOC.

South China

Regional imports in South China – where LNG demand is primarily determined by the southern industrial centre of Shenzhen – saw notable demand growth in July-August, our data indicate. The region’s imports amounted to 4.21mmt over the reporting period, which meant they were up by 0.22mmt (6 percent) from the 3.99mmt recorded in May-June.

Shenzhen terminals 
South China’s imports were led by Shenzhen’s active terminals – Guangdong Dapeng and Shenzhen Diefu LNG. Dongguan LNG and the adjacent peak-shaving facility, on the other hand, continued their market absence. The region’s most prominent terminal – Guangdong Dapeng LNG (GDLNG) – saw offtakes of 1.48mmt, placing it first among China’s terminals. At 1.48mmt, the terminal had increased its July-August imports by 0.13mmt (10 percent) from 1.35mmt during the previous two-month period. Guangdong Dapeng LNG’s average capacity utilisation stood at 131 percent over the reporting period, which resulted in neighbouring Shenzhen Diefu LNG importing 0.72mmt and pegging its terminal utilisation at 108 percent. Shenzhen Diefu usually steps in when GDLNG is stretched beyond capacity.

Zhuhai and Jieyang LNG 
Zhuhai LNG decreased offtakes by 0.05mmt to 0.66mmt over the reporting period from 0.71mmt the previous period, but which still pegged overall capacity utilisation at 118 percent. More than half of Zhuhai’s imports – 0.36mmt – were derived from Qatar’s Ras Laffan LNG complex. Concurrently, Pacific Basin deliveries amounted to 0.22mmt, which were supplied by Queensland Curtis LNG in Australia as well as Malaysia LNG and Indonesia’s Bontang plant. Additionally, there was some Atlantic Basin supply via the Cameron LNG-derived Marvel Swan with a 0.08mmt cargo.

In line with Zhuhai, Jieyang LNG also saw a substantial decrease in imports during the July-August period. Full-period offtakes were down by 0.13mmt (-21 percent) to 0.49mmt in July-August from 0.62mmt in May-June. Accordingly, Jieyang LNG saw capacity utilisation of 70 percent over the reporting period compared to 89 percent in May-June. The terminal has ascended to become an important indicator of Chinese LNG demand since the inauguration of China’s state-owned China Oil and Gas Pipeline Network (also known as PipeChina) last year. PipeChina links the Jieyang terminal to Guangdong Province’s existing pipeline network and further to China’s massive West-East II and III trunklines. Between its commissioning in 2017 and the launch of PipeChina, the terminal had suffered from frequent periods without shipments arriving because its send-out options were mostly limited to truck loadings.

Fujian and Beihai LNG 
In contrast to the overall demand growth in the South China region, Fujian LNG saw demand decrease in July-August compared to the previous reporting period of May-June. At 0.42mmt, imports were down 0.09mmt (-18 percent) from the 0.51mmt recorded during the previous period. The terminal’s capacity utilisation, therefore, stood at 40 percent. Concurrently, Beihai LNG also saw lower demand over the reporting period. Offtakes at the terminal had decreased by 0.11mmt (-46 percent) to 0.13mmt from 0.24mmt in May-June. The terminals’ annualised capacity utilisation stood at 26 percent for the reporting period.

Hainan Island 
The remaining two regional LNG terminals – Hainan LNG and the Hainan Transfer Station on Hainan Island – saw a significant demand increase mainly due to higher activity at the Hainan LNG terminal. Whilst the Transfer Station saw its two-month offtake halve to 0.02mmt from the 0.04mmt recorded in May/June, Hainan LNG boosted imports by 0.17mmt (142 percent) to 0.29mmt in July-August from 0.12mmt in May-June. This was due to a drastic increase in LNG supplied from international sources, chiefly by Australia and Malaysia but also by Brunei and Nigeria. Previously, supply to the terminal was limited to mostly re-exports from Beihai LNG. These re-exports stopped in August. LNG capacity utilisation on Hainan Island over the reporting period was thus 55 percent.

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