China takes take top spot as world's largest LNG importer as prices surge

Quantum Commodity Intelligence – China has become the world's largest LNG importer, overtaking Japan to claim the top spot across a consecutive 12-month period, according to latest ship-tracking data from ICIS LNG Edge.

"The title changes hands as China's demand continues to grow rapidly, while Japan's gas demand for gas-fired power generation has slipped back with the restart of nuclear power plants," said the ICIS report.

For the 12 months from July 2020 to June 2021 ship-tracking data from LNG Edge shows that China imported some 77.4 million tonnes, compared with 77.1m tonnes for Japan.

This marks the first time that China has overtaken Japan over a one-year period. China's imports have already beaten Japan in various individual months, noted ICIS.

China had already overtaken South Korea to become the world's second-largest LNG importer as long ago as September 2017, based on figures for imports during October 2016-September 2017.

Prices

China taking top spot has coincided with unseasonally high summer global gas prices, including record Dutch TTF gas prices of €36.83/MWh which in turn have lifted the Asian JKM benchmark.

"Ongoing tightness in the European gas market continues to push up North Asian LNG. This subsequently spilt over to the Asian market, with the JKM August future ending the session up 0.9% to USD13.110/mmbtu," said Daniel Hynes, senior commodity strategist at ANZ, in a note Friday. 

Meanwhile, tight LNG market conditions are expected to persist in 2021 on the back of resurgent demand, with only a limited easing of availability in 2022, according to a global forecast by ICIS.

Underlying LNG demand will rise 7.9% y-on-y to 384.5 million mt in 2021, outpacing LNG supply growth of 6.8%, according to the ICIS LNG Supply and Demand Forecast.

"Reliability issues and a cyclical decline in capacity additions have constrained the ability of LNG producers to respond to a demand rebound driven by robust recovery from the coronavirus pandemic and the need to refill Europe's depleted gas stocks after a protracted winter," said the report.

ICIS' monthly global balance shows LNG shortfalls will be particularly acute in Summer 2021, before easing temporarily in the shoulder months of September and October, offering global markets temporary respite before further tightness in Winter 2021/2022.