South China's LNG market saw a reduction in both supply and demand in 2022, but the decline in demand was far greater than that in supply, due to a confluence of factors including high prices, Covid-19 restrictions and floundering economy, learned from OilChem.
Imported LNG ex-terminal price in South China averaged Yuan 7,335/tonne this year, up 49.68% from a year earlier, data from OilChem showed. The increase was attributed to reducing imports on account of high international spot price.
International natural gas spot price soared this year as a result of geopolitical disputes, which discouraged import interests from China. At the same time, Chinese importers began to resell spot LNG to Europe due to large arbitrage to move LNG from China to Europe, which caused China's LNG imports shrink significantly in 2022, with that in South China also staging a decline. The import volume in South China was 22.48 million tonnes, down 15.01% on the year, OilChem's data showed.
In addition, domestic LNG plants sold goods at reduced price to occupy more end-user market shares, which dampened imported LNG sales in South China, with the volume by truck at coastal terminals slumping by 49.08% year on year to 3.87 million tonnes, according to OilChem's data.
Meanwhile, affected by economic slowdown, end-user enterprises faced a decline in orders, with operating rate of ceramics and steel enterprises even falling to a level of less than 50% of previous years, which also placed a cap on LNG consumption, coupled with rich pipeline gas supply and high LNG price levels. Taking Guangdong as an example, LNG consumption in the province was 3.95 billion cubic meters this year, down more than 50% from a year earlier.
However, OilChem expects LNG consumption in South China will increase in 2023, as the country is recovering from the pandemic along with an improvement in economy.
Written by Sunny Fang, fss@oilchem.net
Edited by Navy Liu, navy@oilchem.net