Fundamentals

Published at 17:20 31 Oct 2017 by

Global LNG imports presented another mixed picture in September. Chinese imports rose by 0.93 Mt (37%) y/y, supported by an expansion of urban gas connections. South Korean and Indian imports were also up y/y, but Japanese imports fell with cooler weather. Imports to the MENA region fell primarily on lower Egyptian demand, while low Brazilian hydro stocks were the main driver behind an increase in Latin American takes.

China took 3.45 Mt of LNG in September, a considerable 0.93 Mt more y/y. Australian and Qatari cargoes continued to provide the bulk of China’s LNG, with supplies up by 0.66 Mt (57%) y/y and 0.47 Mt (214%) y/y respectively. Given the expansion of urban gas customers (residential and industrial) over the last 12 months, and forecasts for colder-than-average November weather, early heating demand should be buoyant. Assuming normal weather over the whole winter, we expect that China will take 6.6 Mt more LNG y/y over Q4 17 and Q1 18.

South Korean LNG imports were up by 6% y/y at 2.37 Mt in September, despite mild weather. Australian volumes made up the largest share of imports, at 0.67 Mt, up by 0.43 Mt y/y. Qatari cargoes were down by a hefty 0.48 Mt y/y, at 0.63 Mt. Receipts into non-Kogas terminals fell last month compared to earlier in the summer, and exports to the Gwangyang terminal were down y/y in October according to Kpler. We retain our forecast for South Korean imports in Q4 17 to fall y/y by 0.6 Mt (6%) y/y. For 2018, we expect a 2.5 Mt (7%) y/y drop as more new coal-fired power capacity will likely start up by the end of 2017.

Japan’s LNG imports fell by 13% y/y in September to 5.82 Mt as cooler weather dented demand. Power sector gas demand gains in Japan this winter are likely to be limited because of a rise in nuclear generation, driven by higher output from the two Takahama nuclear units and the expected restart of other plants. It is unlikely that the two Ohi reactors will be back online before December. However, given the relatively high base last year, we are forecasting that LNG imports will drop by 1.0 Mt (5%) y/y in Q4 17. We then expect Q1 18 imports to fall by 1.0 Mt (4%) y/y.

Rising LNG prices did not cut price-sensitive India’s demand for September spot cargoes, with imports up by 0.08 Mt y/y to 1.83 Mt. Hot weather moderately supported power sector gas demand, which was met by stronger coal and gas-fired output, while nuclear generation fell and hydro generation was flat y/y. We expect that Indian imports in Q4 17 will be up by 0.5 Mt (11%) y/y, while the expansion of regas capacity should raise 2018 imports by 3.2 Mt (17%) y/y.

Countries in the MENA region imported 1.77 Mt of LNG in September, lower y/y by a large 0.44 Mt. The y/y declines in September were broad-based and were led by Egypt, where imports were 0.20 Mt lower y/y at 0.53 Mt.

Latin American LNG imports were up by 0.27 Mt y/y at 1.58 Mt in September, mainly driven by stronger Brazilian imports because of lower hydro stocks. Mexican LNG imports rose by 0.09 Mt y/y, as delays in domestic pipeline projects limited pipeline imports. Chilean imports were flat y/y, while Argentinian imports fell by 0.05 Mt y/y. Puerto Rico’s imports slowed by a sharp 0.05 Mt (47%) y/y due to infrastructure damage caused by Hurricane Maria.

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