China LNG Market Review H1, 2020
January was the traditional winter peak season, but in 2020, the Spring Festival came early, while the coronavirus broke out in January as well. Thus, China’s LNG market entered hibernation mode from the middle of January, and the situation deteriorated in February due to the strictest economic lockdown to fight the virus. Afterward, with successful epidemic control, China managed to reboot the national economy from March, and the recovery progress of the LNG market was far beyond the national average level because of the sufficient supply and low cost.
On the one hand, the pandemic and oil meltdown together sank the LNG price both in spot and long-terms, and the dropped import cost efficiently helped China’s LNG terminals to keep cutting offers down so as to promote sales, and reduce inventory and intake pressure. From March, LNG terminals initiated a domestic price war aiming the LNG market in the central regions so as to further grab market shares. On the other hand, the feedgas supplier of most LNG reliquefaction plants, CNPC, adjusted the price method of the feedgas at the beginning of the 2019-2020 winter heating season, and the production of LNG plant for the first time received enough support. Also, facing edging competition from terminals, CNPC also cut down the feedgas price in Q2, 2020.
Therefore, China’s LNG price kept dipping and shrank over 35% in the first half of 2020. On the opposite of the weakening price, the domestic LNG sales flourished. The LNG sales at terminals and plants both jumped from March along with the recovery of the national economy, and shored up by the low cost, the sales volume started to create historical highs from April and exceeded 800,000 mt per week from the middle of May.
