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SINGAPORE, Aug. 25 (Reuters) – China’s liquefied natural gas (LNG) imports are expected to increase at a slower pace in the second half of the year after surging growth in the first six months, but moderation is unlikely to curb surging international prices.
China normally ramps up imports of super-refrigerated fuel in the second half of the year to meet winter demand, but purchases have been held back by high prices, a weakening economic recovery in China and a lack of new receiving terminals, according to the reports. traders and analysts.
After growing 28% year-on-year in the first half of the year, second half shipments are expected to increase 12% to 13% from a year earlier, said Ricki Wang, an analyst at China’s commodities consultancy JLC.
“The prices are way too high for my customers to bear them,” said Li Ruipeng, a small gas distributor in Tangshan, the steel capital, in northern China, which has trucked in fuel into local businesses. trailers to petrol stations and industrial users.
Customers like steel mills and glassmakers have either switched to domestic gas, which is around 10% cheaper than imported LNG, or cut production to stem losses, said Li, who had to slow down the process. half of its fleet of 10 trucks due to the decrease. Sales.
Chinese LNG imports are likely to remain stable during the October-March heating season compared to the previous winter, a trader for a Chinese oil major said, highlighting high spot prices as well as infrastructure constraints. .
“China’s ability to handle shipments rather than demand will be the main driver of winter imports. Almost no new terminals have come online this year,” said the official, who spoke on condition of anonymity due to company policy.
A Singapore-based trader added, “There is little (Chinese) demand for October (delivery) given these prices. It looks like they’ve contracted enough for the winter.”
TOO HIGH
China’s strong economic rebound following the coronavirus and power cuts in an extreme summer climate resulted in a counter-seasonal spike in LNG imports during the traditionally low demand season in the second quarter.
But surging spot prices began to discourage purchases in July, with imports falling to their lowest since March.
Benchmark LNG spot prices in Asia hit record highs earlier this year, due to production losses combined with cold weather and increased use in China, India and elsewhere.
Prices this week were at their highest for this time of year since at least 2010. In Tangshan, wholesale LNG was listed at 4.2 yuan ($ 0.65) per cubic meter, compared to 1.7 yuan there. a year ago, Li said.
Analysts say world prices are expected to remain high despite China’s pullback on the pace of imports from July to December.
China, which is on track to overtake Japan as the world’s largest LNG importer, will still increase its annual imports in 2021 by 15-20%.
Asia, meanwhile, will have to compete for LNG in the second half of the year with European buyers looking to replenish stocks after extreme summer weather reduced stocks to critical levels. Read more
ALTERNATIVE SUPPLIES
To meet gas demand, China is turning to increased supplies of domestic gas and piped gas from Russia’s vast Siberian fields.
China’s gas production rose 11% year-on-year in the first seven months following a call from Beijing to strengthen security of supply.
“Pipeline gas will continue to increase to provide a supply cushion during the winter,” said Maggie Kwang, gas analyst at PetroChina International.
This includes supplies from Russia, which is expected to increase the amount of gas pumped through the Power of Siberia pipeline by 50% by the end of the year from August levels.
With oil-linked LNG futures prices now lower than spot LNG prices, Chinese companies could also pressure their suppliers for additional volumes instead of buying in the spot market, traders said.
Meanwhile, Tangshan’s Li said his LNG truck business has struggled to break even for most of this year.
“If the prices stay that high in the winter, I might just stop.”
($ 1 = 6.5000 Chinese yuan renminbi)
Reporting by Chen Aizhu and Jessica Jaganathan; edited by Richard Pullin
Our Standards: The Thomson Reuters Trust Principles.
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