China's natural gas market in 2026: fading seasonality and a rebalancing of LNG imports
The year 2025 marked an inflection point for China's natural gas market. The traditional winter heating season failed to generate the usual price volatility, while LNG imports, historically the primary source of incremental supply, unexpectedly retreated.
Rather than signaling demand weakness, these developments reflect a structural shift. China's gas market has entered a phase characterized by ample supply and compressed price volatility. In 2026, however, the supply-demand balance is poised to tighten modestly, with LNG imports likely to regain strategic importance.
1. 2025 Review: A Year Defined by Stability
China's Domestic Production Anchored the Market
China's domestic gas output rose 6.3% year on year in 2025, lifting its share of total supply to 60.1% and keeping it above 55% for five consecutive years. This expansion was supported by the conclusion of the Seven-Year Action Plan, sustained upstream capital expenditure, and further implementation of market-oriented pricing mechanisms that improved exploration incentives.
As a result, China's domestic supply increasingly functioned as the structural anchor of the market, cushioning the impact of fluctuations in imported volumes.
Record-Low Price Volatility
The annual average LNG price stood at 4,265 yuan/tonne, down 6% year on year. More notably, the full-year price range narrowed to 13%, compared with 27% in 2024 and 149% in 2020.
The disappearance of pronounced seasonality stemmed from three primary factors: (1) A relatively warm winter. (2) Ample China's domestic and pipeline gas supply. (3) Reduced reliance on spot LNG imports
By year-end, feedstock gas auctions even exhibited signs of weak bidding activity and lower clearing prices, reflecting subdued market sentiment.
2. Demand Structure: Divergence Intensifies
Natural gas demand dynamics in 2025 displayed clear structural differentiation.
Transportation gas consumption remained robust. LNG's cost advantage over diesel drove a 21% increase in average daily operating mileage for LNG heavy-duty trucks. LNG trucks accounted for 24.6% of total heavy truck mileage, further consolidating their role in road freight.
Gas-fired power generation expanded rapidly. Installed gas-fired capacity surged from 99.75 GW to 144 GW. Provinces such as Guangdong, Jiangsu, and Sichuan led capacity additions, with Guangdong alone contributing nearly 23 GW of incremental capacity. Power generation emerged as a key driver of gas consumption growth.
By contrast, industrial and chemical gas demand remained under pressure. Subdued real estate activity weighed on ceramics and glass production, while poor margins in methanol and synthetic ammonia, coupled with loose fertilizer supply-demand balances, constrained chemical-sector gas consumption.
3. 2026 Outlook: LNG Imports Poised for Rebound
Entering 2026, several indicators suggest a gradual shift in market dynamics.
Import Dependency Likely to Rise
Total gas demand growth is projected to exceed 5% in 2026. The supply gap is estimated to widen by 8.2% year on year, potentially lifting China's external dependency ratio back above 40%.
LNG Imports Expected to Recover
LNG imports are projected to increase by 16.8% in 2026. The rebound is supported by:
- A low base in 2025;
- The commencement of approximately 15 million tonnes of new long-term LNG contracts;
- Expectations of softer global LNG prices amid anticipated oversupply.
These factors are expected to stimulate both contract and spot procurement.
Pipeline Gas in a Plateau Phase
The China-Russia eastern pipeline has reached full capacity. Absent new pipeline projects coming online, pipeline imports are projected to remain broadly stable year on year, limiting flexibility on this supply channel.
Sectoral Demand Rotation in 2026
- Transportation gas demand is projected to grow 15.1%. Although competition from new energy vehicles is expected to moderate the pace of expansion, this segment is expected to remain the fastest-growing demand category.
- Gas-fired power demand is expected to rise more than 9%, supported by lower gas prices and further installed capacity growth toward 180 GW by year-end.
- Industrial gas demand is projected to expand 5.5%, potentially shifting from contraction to growth on the back of steady-growth policy support.
Structural Transition Underway
China's gas market is transitioning from a domestically anchored supply structure toward a renewed import rebalancing phase. In an environment defined by thin margins and elevated supply levels, incremental shifts in import dependency and demand elasticity are projected to increasingly determine profitability.
The above highlights are drawn from the China Natural Gas Market Outlook Report, a 12-month rolling forecast report produced by GL Consulting, which provides:
- Updated monthly supply-demand balance projections for 2026
- Provincial gas-fired capacity commissioning schedules and detailed consumption estimates
- Threshold price analysis for LNG truck substitution versus diesel
Click the hyperlinks for the full text or email glconsulting@mysteel.com.
