According to China’s General Administration of Customs (GACC), China’s natural gas imports in March 2024, including piped gas import and LNG import, totaled 10.76 MMt, up 1.38% M-O-M and 21.23% Y-O-Y. The average import cost was $483.86/mt ($9.31/MMBtu), down 2.61% M-O-M and down 12.04% Y-O-Y.

LNG Import

In March 2024, the LNG import volume showed high growth rates both M-O-M and Y-O-Y, which also hit a new historical record for March. The average import price decreased both M-O-M and Y-O-Y, and the theoretical arbitrage opportunity turned negative following domestic LNG price drops. It is anticipated that LNG import volume may decrease slightly in April M-O-M amid an off season, and import prices may remain in a downtrend.

Volume: In March 2024, China’s LNG import volume was 6.65 MMt, up 0.70 MMt or 11.71% M-O-M and up 1.33 MMt or 25.06% Y-O-Y. From January to March 2024, China’s total LNG import volume was 19.85 MMt, an increase of 3.47 MMt or 21.16% Y-O-Y. In March, the LNG import volume exhibited high growth rates both Y-O-Y and M-O-M. In addition, it set a new historical record for LNG import in March, according to GACC.

According to SCI’s AIS monitoring, China received approximately 6.62 million tons of LNG imports in 100 cargoes in March 2024, up 11.75% M-O-M and up 24.00% Y-O-Y. Please note that there are differences between the AIS data and customs data that may be caused by the pre-clearance or delayed clearance documented progress, free-bond cargo clearance, historical data backtrace and revision, etc.

Looking at historical patterns, due to the decrease in heating demand following the gradual end of the heating season, the LNG import volume in March tends to show a M-O-M decline, except for 2021 and 2024 since 2015. There were two reasons for the counter-trend increase in LNG import volume in March 2024. First, China’s good economic performance underpinned the gas consumption, driving LNG import volume up. The economy ran stably, and PMI stood at 50.8 in March. Second, spot LNG import volume in March significantly increased, coming after the drop in spot LNG DES China prices during February and March. Ie, the average spot LNG DES China price in February was $8.25/MMBtu, representing a M-O-M decline of $1.25/MMBtu or 13.17%, and a Y-O-Y decline of $6.25/MMBtu or 43%. The fall in spot LNG DES China prices spurred the enthusiasm of tier-2 and tier-3 companies to import spot cargoes. Therein, the import volume from L-T contracted partners took up 89% of the total, and that of spot cargoes represented 11% of the total.

Price: The average LNG import price in March 2024 was $544.4/mt, down $45.24/mt or 7.67% M-O-M, and down $75.43/mt or 12.17% Y-O-Y. The average price showed a downtrend both Y-O-Y and M-O-M.

As for contracted price, contracted price, which is more linked to JCC, ran in a downtrend in the past three months. As for spot price, due to the continued high level of gas inventories in Europe and the U.S. as well as limited heating demand amid mild winter in the northern hemisphere, spot LNG DES China prices in February, the reference price for March delivered cargoes, posted steep declines.

In addition, the average theoretical arbitrage space for imported LNG in March was RMB -20/mt, a M-O-M decrease of RMB 64/mt or 146%, and a Y-O-Y decrease of RMB 1,010/mt or 102%. The drop in import arbitrage in March was greatly affected by the decline in domestic LNG prices. Although import costs had declined to a large extent, domestic LNG prices saw big drops, as the rigid heating demand scaled down; import costs softened and there were more spot LNG cargoes being delivered.

Forecast

Volume: LNG import volume in April is anticipated to decline M-O-M but rise Y-O-Y, while import price will likely extend declines.

Judging from the historical patterns, over the six years since 2018, LNG import volume in April increased M-O-M in four years and decreased M-O-M in two years; import prices declined M-O-M in four years and decreased M-O-M in two years.

The LNG import volume in April 2024 may decline M-O-M. First, the buoyant spot LNG prices, as the market adjusts to the recent supply-side fears, have greatly muted the purchasing activity of tier-2 and tier-3 players for April delivered cargoes. Second, April is the traditional demand off season in China, so importers will gauge LNG import versus demand. The LNG import volume in April 2024 may rise Y-O-Y. First, stable-to-rising economic momentum will continue to support the demand. Second, the start-ups of new terminals since H2, 2023 will likely attract more LNG cargoes to China.

Price: It is expected that the comprehensive LNG import price in April will inch lower M-O-M. The contracted LNG import price in April may rise narrowly M-O-M, as the international crude oil pricing cycle has gradually entered an upward trend. In addition, spot LNG import price in April may fluctuate upward, but the share of spot LNG cargoes is small.

PNG Import

Review

China’s piped gas import in March 2024 headed down but hiked Y-O-Y. The piped gas import recorded at 4.11 MMt, down 11.86% M-O-M and up 17.01% Y-O-Y.

The curtailement mainly came amid warmer weather and maintenance of some imported pipelines. As for demand, most regions saw the end of the winter heating season in March, indicating lower supply to meet lower demand. As for supply, the maintenance of POS and MCP pipelines happened during Mar 24-31 and Mar 14-Apr 1, 2024, which caused a flow reduction of 98 mcm/d, according to market sources. In H1, 2023, POS was under maintenance from Mar 28 to Apr 4, during which the flow was halted. By comparison, MCP saw no maintenance. Additionally, CAP experienced two rounds of maintenance: one was during H2 March, and another was during May 23-30 with 60 mcm/d flow reductions. Russia said the piped gas flow to China kept hitting record highs since January 2024, and it traditionally put new wells into operation in December. In addition, sources said Gazprom overtook Turkmenistan in piped gas supplies to China in Feb 2024 for the first time. In addition, the piped gas flow from Uzbekistan turned zero, but its share of CAP flow was small.

Forecast

The piped gas flow in April is estimated to head up mainly due to the end of the pipeline maintenance. However, the incremental volume is expected to be limited amid an off season.