According to multiple short-term incidents and events, the LNG truck loading delivery capacity shrank sharply this week, and accordingly, the regional LNG price of East China stops the continuous dipping since March and rebounds extensively.
China has put the dangerous chemicals’ safety problem as a priority, and the Opinion to Fully Enhance Dangerous Chemical Production Safety was issued by the central government in February 2020. The LPG tank truck explosion on Jun 13 in Zhejiang’s Wenling caused over 20 deaths and hundreds of injuries, and this incident is expected to trigger the strictest supervision on chemical transportation and logistics ever in history. From the tank truck functional test to the truck fleet qualification check, to the non-compliance business rectification, the chemical transportation capacity was suddenly restricted by large in a short term nationwide.
In the meantime, two overturned accidents happened in a row in Zhejiang recently, and both were on LNG tank trucks belonging to the same truck fleet, which was also the annual contractor with ENN Zhoushan Terminal to provide 120 trucks or 50 trucks per day delivery capacity. Thus, the fleet was temporarily prohibited to operate in Zhejiang, further cutting the local delivery capacity in East China. Meanwhile, the upcoming Dragon Boat Festival holiday will also forbid chemical delivery on highways during the three-day holiday, while the bridge body quiver at Zhoushan Cross-Sea Bridge pushed Zhejiang Highway Corp. to put highway system into overhaul from Jun 18.
Allegedly, the recently imported LNG cargoes at East China’s terminals were mainly under long-term contracts, raising the short-term import cost of those terminals. And, the previous edging price war has already suppressed the LNG price to the floor, and terminals in East China have no interest to further cut offers. Together with the sharply shrinking delivery capacity, the price level starts to rebound in East China this week.
According to SCI’s monitoring, CNPC Rudong has raised ex-terminal price to RMB 2,375/mt by Tuesday, up RMB 200/mt in four working days, and Guanghui Qidong, CNOOC Ningbo, and other terminals with small truck loading also followed the uptrend. Also because of the hike of import cost, terminals in North China raised offers simultaneously. Together, the price drop ceased this week, and SCI China LNG Index started to rebound extensively for the first time since March. By June 23, SCI China LNG Index closed at RMB 2,547/mt, up 2.7% W-O-W, and SCI China LNG Ex-Terminal Average closed at RMB 2,570/mt, up 3.79% W-O-W.
However, in a medium to long run, the fundamentals remain stable with import cost dropping and supply enriching, and SCI expects the LNG market will return the previous downtrend from the short-term turbulence soon from the beginning of July. The global glut on LNG supply, the massive underground input and thriving LNG marketing driven by low prices, and the upcoming import cost bottom at $4-5/mn Btu from end July and August will further activate the domestic motivation, but terminals’ LNG price will also remain weak so as to secure its advantage against the domestic production and piped gas import.
