South Korea imported 3.46 Mt in June, with the 0.99 Mt y/y increase driven by healthy takes from Australia, Malaysia and Qatar. Australian volumes rose by a solid 0.45 Mt y/y to 0.64 Mt, while imports from Malaysia were up by 0.20 Mt to 0.43 Mt. After falling y/y in May, Qatari imports rebounded in June, growing by 0.16 Mt y/y to 1.28 Mt.
Power sector gas demand contracted by 0.05 Mt y/y to 1.04 Mt, while residential and commercial demand nudged higher by 0.02 Mt y/y to 0.89 Mt. These trends are partly explained by cooler weather, with South Korean CDDs down by 14% y/y and by 20% down on five-year norm.
Nonetheless, with the y/y growth in LNG imports, our balances suggest that South Korea injected a net 1.02 Mt of LNG into storage in June. The latest data from JODI show that South Korean storage totalled 1.29 Mt in April. Given the implied stock changes for May and June, this would leave end-June stocks at around 2.75 Mt, higher by around 0.7 Mt y/y.
Looking at lagged power data, total generation increased by 0.74 TWh y/y in May to 42.8 TWh. May was colder than last year in South Korea, with HDDs up by 15% y/y, which likely increased the demand for electric space heating over the month. In order to meet this higher power demand, both coal and renewables generation increased y/y in May, by 1.24 TWh and 0.28 TWh, respectively. At the same time, gas-fired generation contracted by 0.1 TWh and nuclear generation fell by 0.33 TWh, with the former in line with May’s y/y reduction of power sector gas demand. Finally, oil-fired generation also contracted, by 0.32 TWh. With the reduction of power sector gas demand in June, we expect that gas-fired generation likely fell as well.
As of 17 July, there is 8.69 GW of nuclear capacity offline in South Korea, which is 36% of the total and nearly 6.0 GW more y/y. These outages should prove supportive for gas in July, as should the weather, which is forecast to be hotter than normal in July. However, with the high level of gas in storage, this may not lead to an increase in LNG imports in y/y terms.
We now forecast that South Korean LNG imports will increase y/y by 2.5 Mt in 2017, an upward revision of 1.5 Mt on our previous forecast, which reflects higher-than-expected June takes and an increased need for restocking due to an expected stock drawdown over the summer. For 2018, we expect a 2.2 Mt y/y drop, which is unchanged from last month as we still expect to see 2.0 GW of new coal capacity to start up by the end of this year.