Fundamentals

Published at 15:53 28 Feb 2018 by

Global LNG imports totalled 27.7 Mt in January 2018, 3.0 Mt higher than last year. While colder-than-average weather drove high imports in China and India, Japanese takes were mildly lower y/y despite modestly higher power generation. Mexican pipeline imports were largely sufficient for its domestic needs, leaving LNG imports down y/y, while high NE Asian LNG prices attracted cargoes away from Latin America. In the Middle East and North Africa (MENA) imports reached their lowest since March 2015 due to surging domestic gas output in Egypt.

Chinese LNG imports logged another record high in January, growing by 1.59 Mt (51%) y/y to 5.2 Mt on peak winter demand as temperatures dropped amid snowstorms. The surge in Chinese gas demand also attracted one-off pricey cargoes from Angola and reloaded cargoes from European hubs. Moreover, China only saw a modest (in Chinese terms) increase in pipeline imports (+0.20 Mt y/y, +8.2%) as cold weather in Central Asia meant producers in that region limited gas exports to China. We expect Chinese gas demand growth to remain strong in 2018, with LNG imports growing by around 10 Mt y/y.

Despite a continued rise in global LNG spot prices, which for delivery to India averaged 10.7 $/mmbtu for the month, takes increased dramatically y/y in January. Indian LNG imports were 0.58 Mt higher at 1.82 Mt. The surge in gas demand was driven by higher power generation (+6% y/y) as Indian HDDs rose by 21% y/y and were nearly 5% above the five-year average. While there is considerable uncertainty around the country’s new LNG pipeline and regas facilities and their ramp-up rates, we expect India to add 2.7 Mtpa of incremental LNG demand in 2018.

In Japan, however, LNG imports slipped by a small 0.04 Mt y/y to 8.2 Mt in January, even as below-average temperatures supported higher power generation. HDDs in January were up by 5% y/y and were 4% above the five-year average. HDDs have been higher y/y every month so far this winter, pushing power generation higher y/y since October 2017. Across 2018 as a whole, we forecast that Japan's LNG imports will be 2.6 Mt lower y/y. The combination of more nuclear and renewables generation, alongside forecasts for upcoming warmer weather, should continue to chip away at Japanese demand for LNG.

Latin American LNG imports shrank by 0.15 Mt y/y to 0.59 Mt, the lowest level since February 2010. Mexican imports were 0.07 Mt lower y/y and Chilean LNG takes slumped by 0.11 Mt y/y. Like last year, Brazil and Argentina did not import any cargoes in January. We forecast the region’s LNG demand to drop off by 0.1 Mt y/y in 2018.

Countries in the Middle East and North Africa (MENA) imported just 0.46 Mt of LNG in January, lower y/y by 0.39 Mt and the lowest figure since March 2015, which was just before Egypt began to import LNG for the first time. Egypt led the MENA import decline, taking 0.36 Mt less y/y, partly due to mild weather (HDDs -22% y/y) but primarily due to surging domestic gas output. In the wider MENA region, buying will return as summer approaches, particularly in Kuwait and the UAE, but with Egyptian demand declining fast we expect MENA imports to total 13.8 Mt this year, lower y/y by 2.6 Mt.

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