Rising gas supplies may cap China's near-term domestic trucked LNG prices

Modest growth in China's trucked LNG prices in the week to Feb. 28, due to factories resuming their operations after the holiday season, may be capped in the near term as supplies of both LNG and pipeline gas rise over March-April, industrial and trade sources said.

Chinese factories, which were largely shut for the Lunar New Year holidays over Feb. 10-17, have resumed their operations after the Lantern Festival on Feb. 24.

The average price of trucked LNG at 97 domestic LNG plants and receiving terminals, which are not regulated by the government and reflect the tradable price of natural gas in the spot market, was pegged at around Yuan 4,322/mt ($600.82/mt) Feb. 28, up slightly from Yuan 4,220/mt on Feb. 23, calculations based on data from domestic gas distributor ENN Group showed.

However, the price was mixed in different regions. Although the price was higher at inland LNG plants, coastal LNG terminals either kept their prices broadly unchanged or lowered to attract customers, trade sources said.

"The price of trucked LNG is currently more competitive than that of pipeline gas, which has attracted some downstream demand and encouraged inland LNG plants to raise their prices," a trade source in south China said.

Trucked LNG price was estimated at around Yuan 3,880/mt in the northwest region Feb. 28, up more than 10% from Feb. 23, ENN data showed. This was equivalent to around Yuan 2.81/cu m, while the uncontracted pipeline gas was sold at around Yuan 3.91/cu m in the region, according to industrial sources.

To reflect the price growth in the northwest region, the auction price for PetroChina Natural Gas Sales Western Branch's latest round of 105 million cu m of pipeline gas for delivery over March 1-10 settled at Yuan 2.2-2.25/cu m on Chongqing Petroleum and Gas Exchange Feb. 28, up by 11.8% from Yuan 1.98-2/cu m in the previous round, according to ENN.

The price in the latest round was equivalent to around Yuan 3,880-3,953/mt after processing into LNG, ENN said. PetroChina sells its uncontracted pipeline gas to inland LNG plants through the auction mechanism and the price is also one of the spot market indicators for domestic trucked LNG prices, which are not regulated by the government and reflect local spot demand.

LNG terminals

Meanwhile, trucked LNG prices of coastal LNG terminals fell by around Yuan 50-100/mt in the Pearl River Delta and Beijing-Tianjin-Hebei regions, ENN data showed. In the Yangtze River, they only rose by Yuan 25/mt over the same period, the data showed.

"Some LNG terminals are expecting more LNG cargoes in the coming months, which is believed to have forced them to lower prices for promotion in a bid to make more room for new arrivals," another trade source in Beijing said. Chinese LNG buyers have engaged in a flurry of purchases following the sharp decline in Asia-Pacific spot prices, with about 10 cargoes changing hands in the week ended Feb. 23, S&P Global Commodity Insights reported earlier.

According to multiple sources, the cargoes are scheduled for delivery from the second half of March to mid-May, with the buyers being mainly second-tier players in China. Some tenders were also awarded to Chinese national oil companies in the week ended Feb. 23.

China imported 5.36 million mt and 4.77 million mt of LNG in March and April 2023, respectively, according to data from the customs.

Apart from the expected increase in LNG imports over March and April, more pipeline gas is also expected to be supplied to the market with the end of China's heating season around March 15, industrial sources said. This will add more pressure on domestic natural gas prices, they added.

Large-scale centralized district heating in northern China normally begins from Nov. 15 and lasts until March 15, with the heating season for areas at higher latitudes lasting longer. Local governments can also decide about the beginning of heating services based on weather conditions.