The world’s second-largest liquefied natural gas (LNG) importer—China broke another record last month amid rising stockpiles. The January total reached 6.55 million tons, which was up by 2% from the previous record set in December 2018.
The imports of China in 2018 surged 41% from 2017— this was after gas shortages the previous winter prompted Chinese companies to stock up on supplies and pre-order cargoes. This was also in the backdrop of Beijing continuing to push millions of households to switch to gas from coal for heating.
However, according to a source, the import growth cannot be entirely attributed to a rise in demand. The source said that when people see the numbers, they believe that Chinese demand is up but actually it is causing a headache for importers as they have overbought and can’t find the demand to absorb the cargoes.
Meanwhile, China National Offshore Oil Corp (CNOOC) reportedly resold at least one LNG cargo in January. And perhaps another, which is an unusual move during what is normally a peak demand period and highlighting the warmer weather in 2019.
It is also reported that Chinese traders are offering LNG cargoes to international buyers or selling into their domestic market at prices, which are lower than expected. The Lunar New Year holiday has also reportedly made the situation worse due to the factories that are shut down for about a week.
According to Chinese gas-price monitoring agency, yeslng.com wholesale LNG from small, land-based liquefaction plants fell to about 3,500-3,950 yuan ($519-$586) a tonne on February 2, which is less than half the level of last year.
James Taverner of energy consultancy IHS Markit highlighted that China’s gas demand growth should decelerate from the past two years. Taverner said: “Coal-to-gas switching mandates are moderating due to … security of supply concerns, and weakening economic growth.” He added that there was also limited capacity in North China for further LNG ramp-up after increases the past two years.
Meanwhile, trade tensions between the United States and China have also reportedly stiffened financial conditions. This has resulted in dragging China’s growth in 2018 to its weakest in 28 years.