May 28, 2018 / 12:03 PM / 3 months ago

COLUMN-LNG starts rally early, and it's mainly (but not only) China: Russell

(Repeats item issued earlier. The opinions expressed here are those of the author, a columnist for Reuters.)

* GRAPHIC: China LNG imports vs. spot price:

* reut.rs/2Jam75C

By Clyde Russell

LAUNCESTON, Australia, May 28 (Reuters) - The slack period for liquefied natural gas (LNG) in top consumer Asia is usually the shoulder season between winter and summer, or March to May, but this pattern hasn’t really repeated this year.

The spot price of the super-chilled fuel in Asia LNG-AS has been on a rising trend since the beginning of April, and hit $9.20 per million British thermal units (mmBtu) at the end of last week.

It touched its low for 2018 of $7 per mmBtu in the week ended March 29, remained unchanged the next week and then posted gains in six of the seven weeks since.

Last year, the shoulder season low of $5.40 per mmBtu was first reached in late March, and the price drifted in a narrow band until early July, when it started climbing from $5.45 in the week to July 7, 2017.

In 2016, the low was hit in early April before a mild rally for the northern summer, and then another dip in the autumn shoulder season before strong gains in the winter period.

What appears to be different so far this year is that while seasonal price fluctuations are still evident, the dip was shallower than in previous years and the rally from the low looks sharper so far.

Spot LNG fell 39 percent from its peak of $11.50 per mmBtu for the winter of 2018 to the low in late March, while in 2017 the slump from winter peak to shoulder season low was 45 percent, and it was 49 percent the prior year.

So far LNG has rallied 31 percent from the low, in the space of eight weeks.

In 2017, eight weeks after reaching the low, LNG had gained just 12 percent, while the increase was 26 percent in 2016.

What the numbers show is that while seasonality is still in place, the price lows aren’t as deep as in previous years and the rally from that low appears to be on track to be steeper and higher.

The easy explanation for this dynamic is China, which has continued to buy LNG at a frantic pace this year, after the 46.4 percent jump in imports in 2017 to a total of 38.1 million tonnes, making it the world’s second-biggest buyer behind Japan.

China’s LNG imports rose 58 percent to 15.8 million tonnes in the first four months of this year compared to the same period a year earlier, according to customs data.

This would put it on target for imports of more than 47 million tonnes for the full year, but this is likely to be a conservative estimate, given LNG buying tend to ramp up in the months ahead of the peak winter demand period.

MORE THAN CHINA

But it’s not just China that is sucking up more LNG, with South Korea making a bid to reclaim its former place as the world’s second-biggest importer.

In the first four months of the year South Korea brought in 16.2 million tonnes of LNG, up 18.2 percent from the same period last year, according customs data.

Even top importer Japan is buying modestly more LNG, with imports in the first quarter up 1.1 percent from the same period in 2017, a faster pace of growth than the 0.4 percent for the whole of 2017.

It’s not only the top three importers that are showing growth, with total global seaborne LNG flows rising, according to vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts.

In the first five months of 2018, a total of 125.1 million tonnes of LNG has been discharged, a figure that may rise to closer to 133 million by the end of this month as more vessels are unloaded.

This would be some 14 million tonnes, or almost 12 percent, more than the 118.9 million tonnes discharged in the first five months of last year.

The data shows that while China is the standout when it comes to driving LNG demand and prices, it’s not the only show in town.

Editing by Richard Pullin

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