SINGAPORE: The spot prices for liquefied natural gas (LNG) are exacerbating the squeeze in the availability of gas in Asia’s main fast-growing emerging markets, just as a cold spell in other parts of the country is raising fuel demand.
As lofty rates threaten driving up the production costs of factories, which could make electricity more pricey for customers, companies from Pakistan to China cancelled a flurry of LNG tenders this week, multiple trade sources said.
Since May, LNG-AS has risen sevenfold to six-year highs, led by supply losses in Australia, Malaysia, Norway and Qatar, along with accelerating usage in China, India and elsewhere.
In January, consumers with no substitutes are now paying top dollar for timely shipments,” said Chong Zhi Xin, director of IHS Markit consultancy.”
According to reports, the state buyer for Pakistan – one of the fastest rising LNG markets – did not award an emergency tender requesting delivery of three loads in January after obtaining high rates.
Instead the sources said, power plants could prefer to burn dirtier yet cheaper fuel oil, but they are also facing rising prices in that market.
Gujarat State Petroleum Corp (GSPC) and Indian Oil Corp did not grant tenders in India seeking delivery of cargo between January and February, trade sources said.
Gas shortages are now evident in Bangladesh.
During the winter season, we have no gas for cooking until the) afternoon. Hardly any gas is there. Sumi Akter, a mother of two in the capital, Dhaka, said, “I can’t even boil water, let alone cook food.”
After issuing multiple tenders over the past few months, Bangladesh has only imported one spot cargo this winter, a senior energy ministry official said.
“We started importing from the spot market, but because of the abnormally high prices, the effort did not succeed,” the official said.
Buyers in China, the second largest LNG importer in the world after Japan, are also feeling the pinch, with one steel dealer announcing a spike of about 2% in billet prices at the Tangshan steelmaking centre, due to increasing prices of natural gas. Steel mills use natural gas to fire their output furnaces.
PetroChina and China National Offshore Oil Corp (CNOOC) did not award tenders put on the Shanghai Petroleum and Natural Gas Exchange to China’s top buyers, although Guangzhou Gas and Guangdong Energy have also not recently awarded tenders, traders said.
In certain areas in northern China, higher costs along with a gas supply shortage have seen operations at liquefaction plants slashed by 20pc to 40pc, sources added.
The spot power prices of Japan’s top LNG importer have also risen to their highest since July 2018 as cold weather has fueled heating demand.
A Singapore-based LNG trader said, “LNG prices have reached a point where I don’t think it’s feasible for some price-sensitive buyers.”
The latest market supply pinch has also been accentuated by a tight shipping market.
Robert Sims, research analyst at Wood Mackenzie, said It is truly the perfect storm, and the fundamentals have supported the price rally.”