Chinese LNG Demand Growth Under Pressure

Wednesday, 27 April 2022
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Chinese LNG demand has come under intense pressure following continued coronavirus flare-ups and firm lockdowns in response. Lower domestic LNG prices vis-à-vis their landed counterparts have further damped Chinese demand growth. Whilst LNG imports remain above 2019-levels, they are severely lagging those of the previous two years. 

Meanwhile, major Chinese LNG buyers have been looking to offload excess cargoes. 

Our data has shown a distinct slump in China’s weekly LNG demand since the end of January this year.

Imports for the first three weeks of April have fallen from 4.71mmt in 2021 to 3.72mmt in 2022, a difference of 0.99mmt. 

market tracker 25 apr 2022

Demand growth drag

China has ascended as the world's largest LNG buyer. At 79.17mmt, the country imported 5.69mmt more than Japan last year, our data show, with the latter taking in 73.48mmt.

However, a combination of protracted high prices and repeated flare-ups of coronavirus, which prompted harsh lockdown measures, had already been a drag on demand growth last winter. Importantly, China’s domestic LNG prices have been lagging behind their landed counterparts, government data show.

Total imports of 4.51mmt this April, as indicated by our current market visibility, would be the lowest for that month since 2019.

Dynamic zero-Covid

China is pursuing a ‘dynamic zero-Covid’ policy comprising specific but firm local area lockdowns and mass testing to contain outbreaks.

Whilst the central government is keen to limit the economic impact, local governments have often erred on the side of caution. Perhaps most prominently, Shanghai was made subject to a two-phase lockdown at the end of March that has severely scaled back economic and social activity in the area.

Whilst this has not impacted apparent LNG demand in April – our market visibility indicates imports of c. 0.39mmt this month, broadly in line with April demand since 2019 – we have not yet seen any cargoes earmarked for Shanghai arrival in May. Our current delivery horizon for visible LNG cargoes going to China is the middle of May.

Potential lockdown

in preparation for a potential Shanghai-type lockdown. Notably, LNG imports at the three LNG terminals serving China’s capital – Tianjin LNG, Tianjin-Nangang LNG and Caofeidian LNG – are likely to have reduced their month-on-month imports by 0.18mmt by 30 April, our market visibility suggests.

Excess cargoes

China National Offshore Oil Company – or CNNOC – has offered several spot cargoes for summer delivery, traders have told Bloomberg in April.

In January this year, the company had already put an unspecified number of LNG cargoes for sale for delivery between May and November. At the time, Sinopec, another Chinese hydrocarbon and petrochemical conglomerate, had also issued a massive tender to offload up to 45 cargoes for February-October delivery.

This stands in stark contrast to China’s previous negotiations for additional US LNG cargoes and the inaugural LNG delivery under a new long-term supply deal between Qatar Petroleum and Sinopec in January.

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