There are expectations of an increase in both domestic and imported LNG supply after the Labor Day holiday, while the demand will present a downtrend due to the higher LNG prices and the restrictions on transporting hazardous chemicals through highways during the holiday, which may in turn place a cap on LNG prices in May, according to OilChem.
The domestic LNG supply is expected to increase due to rising feed gas supplies.
Source: OilChem
On April 29, the state-owned PertroChina offered 310 million cubic meters of feed gas to LNG plants in the northwest part of China for May delivery via auction, with a daily average of 10 million cubic meters, an increase of 500,000 cubic meters per day compared to April. On this basis, the northwestern LNG plants began to increase the production from April 30.
Data from OilChem showed that, the daily LNG production was 101.23 million cubic meters per day as of April 30, with a capacity utilization rate of up to 57.5%. Considering that Shaanxi Jingbian Xilan and Shaanxi Hengkai have plans to resume the production in early May, the LNG production is expected to have risen slightly to 102.03 million cubic meters per day during the Labor Day holiday, with the capacity utilization rate estimated at 57.94%.
The increase in imported goods during the Labor Day holiday dampens the sales.
Source: OilChem
The imported LNG arrivals at terminals stood at 862,500 tonnes during the Labor Day holiday, up 6.02% MoM, and the terminals sold 2,450 trucks of goods on April 28. Looking at the sales in the past two years, it is expected that the sales volumes by trucks at terminals will be actually poor during the Labor Day holiday this year, mainly due to the transportation restrictions, with the overall sales to be lower than usual.
Higher LNG prices drive down the vehicle LNG consumption.
Source: OilChem
The feed gas transaction for May delivery was settled at Yuan 2.53-2.63/cu m, up Yuan 0.31/cu m at the low end and Yuan 0.23/cu m at the high end from the last auction, equivalent to a production cost of Yuan 4,470-4,620/t, further driving up the domestic LNG prices.
Source: OilChem
The increase in LNG prices weighed down the demand, with some industrial users changing to use PNG instead. The domestic daily LNG consumption recorded 121,200 tonnes on April 28, a decrease of 0.47% MoM. Furthermore, the Labor Day holiday and the transportation restrictions on hazardous chemicals are expected to lower the consumption in May.
The transportation restrictions will lift the LNG Inventory.
Source: OilChem
Source: OilChem
Considering that the transportation restrictions during the Labor Day holiday may place a cap on sales, LNG plants in Shaanxi, Inner Mongolia, Shanxi and Sichuan controlled their LNG inventories at a low level, resulting in an inventory of 340,000 tonnes by end-April, a decrease of 8.03% compared to the end of last month. Meanwhile, due to the price reduction, the imported LNG inventory at terminals stood at 1.16 million tonnes, a decrease of 140,000 tonnes from the end of last month. As the sales are expected to decrease while the supply to increase during the Labor Day holiday, there are expectations of an increase in both domestic and imported LNG inventory in May.
Taken together, under higher LNG supply and weakening demand, coupled with rising inventory levels, the LNG prices are projected to move lower after the Labor Day holiday.
Written by Sunny Fang, fss@oilchem.net
Edited by Aggie Hu, huchenying@mysteel.com