Russell: China's imports of LNG are expected to increase for the 4th consecutive month. But it's still not bullish.
China's LNG imports are expected to increase for the fourth consecutive month in August. However, this might not be as positive as first seems.
According to commodity analysts Kpler, the world's largest buyer of super-chilled gasoline is on course to import 6.04 million tons of fuel in August. This will be the highest volume since January when the same amount was imported.
Since February, when China's LNG imports hit a low of 4,48 million tons, they have trended upwards.
While this data indicates a rebound in demand, a much more significant number shows that China's appetite remains muted for LNG.
Last October 2024 was the last month that imports exceeded the same period a year before. Since then, arrivals are down on an annual basis.
China's LNG imports will not be able to recover until they surpass the previous year's level in the same month.
What will it take to get China's LNG consumption to grow year-on-year?
Most likely, the answer will be linked to spot price.
LNG cargoes are not purchased on a spot basis. The LNG China imports is mostly volumes that have been secured through long-term contracts.
Spot price of LNG for North Asia
The price is lower than the highest so far this year of $16.10 per million Btu in mid-February. However, it's worth noting that in the week leading up to May 2, the lowest price was $11.00.
Since May 2024 the spot price of LNG hasn't dropped below $11 per million Btu, which means that LNG is expensive compared to recent years. The lowest prices were $8.30 and $9.00 respectively in 2024.
LNG is not competitive in China if the spot price exceeds $10 per mmBtu. This results in utilities reducing their imports.
INDIA SLUMB
According to Kpler, the impact of high spot price can be seen by other price-sensitive Asian buyers, including India, where imports will fall for a 3rd straight month to 1,83 million tons in August.
If August's final figures remain at this level, India will have its weakest month since June 2023.
Another question that the market should ask is whether spot prices will continue to fall given the weakness of buyers like China and India.
Prices have been high so far this year as Europe works to fill natural gas storages. However, this will start to drop as inventories increase.
Europe's imports in August are expected to be 7.86 million tonnes, down from the 8.84 million tons imported in July. This is the fifth consecutive month of decline.
The imports of LNG in Europe are up on an annual basis. August is likely to be 22 percent higher than the 6.45 millions imported during the same period last year.
According to Kpler, Europe's LNG imports for the first eight-month period of 2019 are 82.71 millions tons, 22.1% more than the 67.74 in 2024.
The demand for asian products has also been increasing in developed countries, who are less sensitive to changes in prices.
Japan, which is the second largest LNG buyer in the world, will receive 5,83 million tons of LNG in August. This will be the highest amount since February due to the increased demand during the northern summer.
South Korea is the third largest LNG importer and it's estimated that August's arrivals will be 4.99 million tonnes, the highest since December 2023.
The strong growth in Europe this year, and the seasonal demand for LNG in Japan and South Korea, keep spot LNG prices high enough to limit imports from China, India, and other price sensitive buyers in Asia.
You like this column? Open Interest (ROI) is your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X.
These are the views of the columnist, an author for.
(source: Reuters)
