Tight COVID-19 measures slow China's trucked LNG sales in several provinces

Trucked LNG loading schedules have slowed at several LNG terminals in northern and southern China after tighter movement restrictions were imposed in some cities and provinces to control the largest COVID-19 outbreak in the country.

China's intensifying anti-pandemic measures have caused demand destruction for oil and petroleum products, according to S&P Global Commodity Insights, which expects the effect of lockdowns on oil demand in March and April to be greater than rising oil prices.

COVID-19 exacerbates the impact of record high global spot LNG prices on China's gas demand amid expectations of slower economic growth in 2022.

President Xi Jinping on Thursday called for a "swift containment" of the outbreak but at a minimum socioeconomic development cost.

China recorded 2,388 confirmed COVID-19 cases and 1,742 asymptomatic infections March 17, latest government data showed. The outbreak has been severe in the cities of Jilin and Changchun in the northern Jilin province, the cities of Tianjin and Qingdao in the northern Shandong province, and the manufacturing hub of Shenzhen in the Guangdong province.

Loadings slow

Downstream LNG supply has been affected by a mix of slowing business activity and logistical issues as companies grapple with some of the strictest restrictions in China since the start of the pandemic.

LNG terminal operators require truck drivers to produce a qualified nucleic acid test report within 48 hours of reporting for duty. Transportation between some cities has been restricted, affecting trucked LNG distribution, market sources said.

Jilin province has no LNG terminal, but the daily loading trucked LNG schedule at PipeChina's 6 million mt/year Dalian LNG terminal in the adjacent Liaoning province fell 43% to 20 trucks on March 15, from March 1, according to domestic information provider JLC.

Daily trucked LNG loadings scheduled at PetroChina's 10 million mt/year Tangshan LNG terminal in the Hebei province in northern China plunged 68% to eight trucks in the first half of March, the data showed.

The loadings scheduled at state-owned Sinopec's 10 million mt/year LNG terminal slumped 66.7% to five trucks during the same period, while Sinopec's 7 million mt/year Qingdao LNG terminal in Shandong province saw its loadings plummet 81.3% to 30 trucks.

Scheduled loadings at PipeChina's 6 million mt/year LNG terminal in Tianjin dropped 34.6% to 85 trucks in the first half of March, JLC data showed. PipeChina's Tianjin LNG terminal has the highest number of trucked LNG sales, which hit a record high of 646 trucks per day on Nov. 12, according to the provincial government.

PipeChina's 7 million mt/year Shenzhen Diefu LNG terminal in southern China loaded five trucks of LNG on March 15, down 95% from March 1, according to JLC data.

These terminals together account for 15%-20% of China's total trucked LNG supply that can average about 2,500-3,500 trucks per day. Downstream end-users of natural gas typically sign purchase contracts with a gas supplier, and terminals schedule loadings based on volume and contract terms.

China's overall trucked LNG loadings, the highest in the world, were about 15% lower than the total planned volume over recent weeks, a local market source said.

Price effect

Domestic demand for natural gas, particularly LNG, has been dampened by high global prices.

The Platts JKM benchmark for spot LNG in Northeast Asia averaged $35.87/MMBtu over Feb. 16-March 15 for April-delivery cargoes on a DES basis, up about 50.9% month on month, according to S&P Global data.

The price was equivalent to about Yuan 11,000/mt after adding taxes and fee. China's LNG terminals maintained their trucked LNG offers in the week ended March 18 due to high import costs and relatively low inventories, market sources said.

Trucked LNG prices for coastal terminals and inland plants averaged Yuan 8,078/mt March 16, mostly unchanged from early March, data from the Shanghai Petroleum and Natural Gas Exchange showed. The prices were above the breakeven level for many businesses.

High prices of natural gas and chemicals used as raw materials have forced ceramics factories, which operate more than 700 ceramic production lines in the Guangdong province, to operate at half of their capacity, the lowest for this time of the year in recent years, Ceramics Information, or CI, a Foshan government-backed information provider, said March 10.

Some ceramics factories in Foshan that had resumed operations after the Lunar New Year holiday were forced to shut down again after natural gas prices exceeded Yuan 7/cu m, the CI said, citing suppliers.