South Korea imported 3.53 Mt of LNG in March, which is a touch lower than February’s 3.60 Mt but still 0.10 Mt higher y/y. That said, it is the smallest y/y increase the country has logged since October 2016. Imports were still higher than demand of 3.22 Mt, which suggests that South Korea made a net stockbuild of 0.31 Mt last month, pushing implied LNG stocks to 1.95 Mt, broadly flat y/y and the highest since November 2016.
Qatari exports into South Korea were 0.88 Mt in March, flat y/y for the first time since July 2016. High demand has supported Korean LNG prices since late last summer, helping to attract Qatari swing supply, but as these prices have softened, some Qatari supply was redirected to Europe in March. Likewise, imports of Nigerian LNG edged down y/y last month for the first time since October 2016, while France logged a considerable y/y increase in Nigerian receipts. Higher Australian exports into South Korea may also have weighed on LNG prices, with Australian volumes to the country totalling 0.77 Mt last month, up by 0.17 Mt m/m and 0.28 Mt y/y.
South Korean LNG prices for March delivery stepped down despite cold weather supporting heating demand. In March, HDDs were 4% higher than the five-year average, helping push LDZ demand to 1.96 Mt, 0.11 Mt (6%) higher y/y. Power sector gas demand was 2% lower y/y at 1.26 Mt, despite a full 25% (5.7 GW) of the country’s nuclear fleet being offline for maintenance.
In contrast, gas-fired generation in February (the latest data available) was a strong 10 TWh, which is just a touch below January’s five-month high of 10.3 TWh and up by 1.81 TWh y/y. Nuclear capacity constraints pared nuclear generation by 1.79 TWh y/y to 12.37 TWh in February, but renewable generation posted a record y/y increase of 1 TWh to 2.21 TWh.
April gas demand could find some support from 4.9 GW of nuclear capacity constraints, as 21% of the total fleet is now offline for maintenance. Further ahead, weather forecasts suggest a 50% chance that April-June temperatures will be above the seasonal norm, which could boost cooling demand. However, any impact on power sector gas demand could be muted as over 2 GW of new coal-fired plants are expected to start commercial operations in H1 17. From Q2 17 onwards, we expect the additions of new coal and nuclear plants will start to erode LNG demand. We forecast y/y LNG reductions in South Korea of 1.7 Mt in 2017, a smaller reduction than forecast last month as weather is looking more supportive in Q2 17. We expect another 2.2 Mt y/y drop in 2018.