According to China’s General Administration of Customs (GACC), China’s natural gas imports in August 2024, including piped gas import and LNG import, totaled 11.76 million tons, up 8.30% M-O-M and up 8.31% Y-O-Y. The average import cost was $494.34/mt ($9.51/MMBtu), up 4.45% M-O-M and up 3.55% Y-O-Y.

LNG Import 

In August 2024, LNG import volume rose marginally both M-O-M and Y-O-Y. The average import price increased both M-O-M and Y-O-Y, and the theoretical arbitrage space was further enlarged. It is anticipated that LNG import volume in September will be higher M-O-M amid regional gas power demand, start-ups of new terminals and pre-winter replenishments. In addition, import prices in September are predicted to move higher.  

Volume: In August 2024, China’s LNG import volume was 6.54 MMt, up 708kt or 12.15% M-O-M and up 315kt or 5.06% Y-O-Y. From January to August 2024, China’s total LNG import volume was 50.29 MMt, an increase of 4.87 MMt or 10.72% Y-O-Y. In August, the LNG import volume remained in an uptrend M-O-M and Y-O-Y, while the M-O-M growth rate hit the highest level this year.

According to SCI’s AIS monitoring, China received approximately 6.53 million tons of LNG imports in 99 cargoes in August 2024, up 9.02% M-O-M and up 3.69% 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, the LNG import volume in September tends to show a M-O-M rise from 2016 to 2023 except in 2022. In the past years, the M-O-M rise in LNG import volume was mainly a combination of strong gas power demand but weak industrial demand. And it also worked in this August. On the one hand, the gas power demand was strong. The national temperature in August was 22.6^oC, 1.5^oC higher than the historical average. Moreover, the hot weather in the south lasted for many days and was extremely intense. In addition, the drought in Sichuan, Yunnan, Guizhou, etc. resulted in limited hydropower, indicating certain peak-shaving demand for gas power. The national hydropower only rose by 10.7%, down 25.5% M-O-M, according to NBS. According to SCI’s AIS monitoring, LNG import volume in East China and North China both grew by 19% M-O-M, and terminals in Diefu, Jinwan, Putian, Yangshan and Caofeidian saw higher regas for summer cooling.

Therein, the import volume from L-T contracted partners took up 92% of the total, and that of spot cargoes represented 8% of the total. There were some spot LNG purchases delivered in August, affected by the gradual decline in spot LNG price in July. In response, spot LNG import in August increased by about 1% M-O-M, mainly from Mozambique, Nigeria, etc.

Price: The average LNG import price in August 2024 was $586.16/mt, up $28.64/mt or 5.14% M-O-M, and up $20.15/mt or 3.56% Y-O-Y.

LNG import prices remained in an uptrend in August mainly following buoyant spot LNG prices. Contracted prices are more linked to JCC, which showed a downtrend from May 2024. Spot LNG prices DES China were on an upswing.

In addition, the average theoretical arbitrage space for imported LNG in August was RMB 419/mt, a M-O-M increase of RMB 117/mt or 39% and a Y-O-Y increase of RMB 716/mt or 41%. Import arbitrage in August hit the highest level since February. This mainly came after rising prices of domestic LNG. In August, domestic LNG ex-terminal prices rose by RMB 321.36/mt or 6.73% M-O-M, mainly in line with firm spot LNG DES China prices and limited LNG supply availability caused by higher regas for summer cooling demand. 

Forecast

Volume: LNG import volume in September is anticipated to trend higher M-O-M, mainly owing to regional gas power demand, start-ups of new terminals and inventory pileup needs ahead of the winter heating season.

Judging from the historical patterns, over the six years since 2018, LNG import volume in August increased M-O-M in two years and decreased M-O-M in 4 years; import prices declined M-O-M in two years and increased M-O-M in 4 years.

Traditionally, September is a transition period from off season to winter heating season, during which, the injection pace for UGS facilities slows down. However, domestic production is sufficient while piped gas supply is loose, indicating downside risks for LNG import volume. However, LNG import volume in September 2024 is estimated to further rise. First, H1 September still saw periodical high temperature, especially in East China, South China, Central China and Southwest China, with temperature being 1-2℃ higher than the historical average. In addition, the hydropower in Southwest China underperformed. Second, new terminals boosted import. E.g., Huaying Chaozhou embraced its first trail cargo; PipeChina Zhangzhou saw its 3^rd and 4^th cargoes in September. Third, upstream suppliers would likely lift import, in response to scheduled maintenance for import pipelines and inventory pileup needs ahead of the winter heating season.

Price: It is expected that the comprehensive LNG import price in September will inch higher M-O-M. The contracted LNG import price in August will decline marginally M-O-M, as the international crude oil pricing cycle is in a downtrend. In addition, spot LNG import prices in September will remain in an uptrend.

PNG Import

Review

China’s piped gas import in August 2024 headed up both M-O-M and Y-O-Y. The piped gas import was recorded at 5.22 MMt, up 5.34% M-O-M and 14.56% Y-O-Y. Piped gas import hit a historical high, with the incremental volume mainly coming from CAP.

Seen from the total gas supply, the total gas supply in August 2024 was 36.49 bcm, up 3.53% M-O-M and 9.91% Y-O-Y. Among them, natural gas production stood at 20.02 bcm; LNG import volume reached 9.15 bcm; piped gas import volume was 7.31 bcm.  

Forecast

In September, the gas supply will likely remain loose. Piped gas import volume will likely scale up. Traditionally, CAP and POS will be under maintenance in September, and this loss will be reflected in September data from China’s Customs due to the Golden Week holiday. CAP saw maintenance during Sep 11-18, 2024 with affected flows of 20 mcm/d, and POS witnessed maintenance during Sep 21-27, 2024 with affected flows of 80 mcm/d. According to SCI’s AIS shipments, LNG import volume stood at 7.06 MMt, hitting record highs in the non-heating season. As for demand, there still exist uncertainties for industrial demand. On the one hand, the declines in prices of most commodities weakened, which may subdue the production activity in September, despite a traditional peak season. On the other hand, with the announcement of the Fed’s interest rate cut and the cuts in domestic RRR, interest rate and loan rates of existing houses in mid-to-late September, the market is expected to be boosted. However, whether these policies can substantially boost the enthusiasm of the market economy and production enterprises remains to be seen. On top of industrial demand, pre-winter replenishment demand will sustain.

Looking ahead, Russia plans to hike daily piped gas flows to China in December in advance. Gazprom and CNPC reached an agreement to advance the supply of piped gas to China through the Power of Siberia pipeline (POS 1) to the maximum level stipulated in the contract of 38 bcma, according to the meeting between Gazprom and CNPC in Beijing on September 20, 2024. The increase in supply agreed by the two sides in December this year will ensure an increase in daily gas supplies to China through POS 1 to the maximum contractual level, which was previously targeted in early 2025. Last winter, Russia provided China with an additional 0.6 bcm via POS 1 on top of contractual obligations. This December, according to the 20.8 bcm piped gas flow in Jan-Aug, then there may be 0.57 bcm of additional gas supply.