North Asia LNG importers resell Dec cargoes as stocks high, domestic demand low

Asian LNG importers including China, Japan and South Korea are looking to resell some December-delivery LNG cargoes in the wake of high inventories and weaker-than-expected downstream demand, multiple industry and trade sources told S&P Global Commodity Insights.

Chinese LNG importers, including PetroChina and CNOOC, were said to have offered some December-delivery LNG cargoes in the week ended Nov. 17 as part of “inventory optimization”, market sources said. Some Chinese companies resold at least five LNG cargoes in November, according to a report posted on Chongqing Petroleum and Gas Exchange website Nov. 20.

“Many LNG receiving terminals in China were said [to] have stored their tanks to relatively high levels before the start of heating season,” said a Chinese trader source. “Now most of them were preparing to reduce LNG shipments in the near term due to weaker-than-expected downstream demand.”

Another source at a Chinese importer said some second-tier importers were selling second-half December LNG cargoes, while also looking to buy first-quarter 2024 cargoes.

“It’s a contango market now. Currently, prices in January are the highest. But prices start to move down from H2 January to H1 February by almost 30 cents,” an industry source based in Singapore said.

Large-scale centralized district heating in most parts of northern China normally starts around Nov. 15 and lasts until March 15. However, heating in some northernmost cities starts earlier around mid-October. The heating season in a few regions may last longer and local authorities decide when to begin centralized district heating based on the weather.

A cold snap in early November prompted Beijing to kick off its central heating supply a week earlier than its usual start date for the winter season, but trade sources from North China said the impact has been waning, with temperatures gradually warming up in mid-November.

China Central Meteorological Observatory forecast a new cold wave in most regions of the country over Nov. 21-24, with temperatures in central and eastern Inner Mongolia, western and northern North China, Northeast China, Shandong Peninsula dropping by 12-16 C.

Trade sources said they do not expect domestic LNG prices to rise much, considering sufficient supply and high inventory currently.

Trucked LNG prices rose Yuan 80/mt from Nov. 17 to about Yuan 5,380/mt in China’s northern Beijing-Tianjin-Hebei region, and Yuan 5,180/mt in the country’s Northwest region Nov. 20, while prices were broadly unchanged in the Yangtze River Delta and Pearl River Delta regions, data from ENN Energy’s affiliated information providing platform showed.

China has been well prepared for natural gas supply this winter, with its coal inventory at a record high 200 million mt, the National Development and Reform Commission said at a press conference Nov. 16.

North Asia prospects

Some Japanese and South Korean LNG importers have also offered to sell LNG cargoes recently, trade sources said.

Kansai Electric has been selling, especially since it restarted its nuclear plants and has sufficient inventories, traders based in Japan and Singapore said.

Meanwhile, Kogas had deferred some of its December cargoes to 2024 to manage excess inventory, said traders based in Singapore.

Multiple sources familiar with knowledge of the matter said Kogas and POSCO terminal inventories may exceed 80%, contributing to overall LNG stock levels in South Korea of 85%-90%. Certain buyers were actively addressing inventory management for optimization, according to trade sources end-users.

Market participants have anticipated a mild winter, which has led to tepid LNG demand, trade sources said.

Some local media reports have indicated an expected average temperature of 10 C over November-December, and hence “LNG inventory withdrawal could be slower than expected during winter,” a trader source in North Asia said.

The Japan Meteorological Agency has predicted a warming trend over November 18-24, maintaining expectations of mild weather from December to February.

A Japanese end-user said, “inventory in Japan seems high, leading buyers to request delivery postponements.”

Another end-user source from Japan anticipated sustained elevated LNG stocks until the first half of January, with replenishment demand dependent on the severity of cold expected in the latter half of January.
Source: Platts