The volume of LNG currently stored at sea has increased compared to last year due to more vessels in Asia, as spot demand from Japan, China and South Korea declines.
Global inventories of LNG were up by 240,000 tonnes from the same time last year, reaching 550,000 tonnes. Bank of America notes that floating storage levels are at a five-year seasonal high, putting the market in a precarious position ahead of summer, reports Reuters.
While restarting nuclear plants from maintenance has curbed demand in Japan and South Korea, China has relied heavily on coal imports to restart its economy after strict “zero-Covid” lockdowns. Consequently, while China typically imports LNG, it exported a monthly record of 156,718 tonnes in February.
In Japan, the LNG inventory of major power utilities stood at 2.42 million tonnes as of April, based on records by Japan’s Ministry of Economy, Trade and Industry. This is 0.79 million tonnes higher than the volume at the end of March 2022.
Elsewhere, South Korea’s LNG imports came down from 4.95 million tonnes in March 2022 to 4.07 million tonnes in March 2023. In the same time, the number of vessels around Europe dropped to average levels after operations resumed at French terminals following strikes.
As summer approaches, LNG demand and prices remain uncertain
The additional floating volumes from Asia could drive down spot prices ahead of summer in the northern hemisphere, when demand will rise. Last week, Asian spot LNG prices slipped to a 22-month low, following slow demand from Japan, South Korea and China.
The average price of LNG deliveries to north-east Asia in May is expected to be $12 per million British thermal units (mmBtu).
In 2021, China was the world’s largest LNG importer. As it emerged from its pandemic restrictions, demand for LNG in the energy industry was expected to rise. Instead, China resorted to record coal imports from Australiato kickstart its power grids and steel industry. China’s January-March LNG import fell by 3.6% in 2022 to 26.7 million tonnes this year.
The trend of lessening demand has continued from November 2022, when Asian LNG importers sought to defer cargoes as storage terminals reached their full capacity. A mild winter in the region suppressed demand, lowering prices.