Mismatch of supply and demand eases LNG price 'high diving'

As the downstream demand weakens as the Spring Festival approaches and the mismatch of market supply and demand eases, the price of liquefied natural gas (LNG), which has soared to the sky at the end of 2020, has begun to decline rapidly in the near term.

LNG price diving

"In 2021, after LNG prices continued to rise for a short period of time, the second half of January ushered in an inflection point, the market became rational, and high prices continued to decline." said Tong He, an analyst at the Business Society. On January 22, LNG prices in many places went up. Fell, and the price is generally around 4500 CNY/ton. Since then, on January 27, the domestic LNG market saw an overall increase of about 3%. The price of liquids in Shaanxi, Shanxi, Ningxia and other places actively increased, and the Shanxi region went up by a larger amount, rising by 400 CNY/ton.

Tong He said that recently the temperature has risen compared to before, and some areas have been repeatedly affected by public health incidents and production has been suspended. Demand support has begun to decline. In addition, the liquid price in the previous period has remained high, and the downstream psychological resistance is strong. Under pressure, the overall transaction atmosphere in the market began to fade, and high prices fell. Last week, the price of liquefied natural gas dropped sharply, and the price was generally concentrated around 4500 CNY/ton. The market returned to rationality. Although the liquid price stopped falling and rose this week, the increase was significantly slower than the previous period, generally fluctuating in the range of 50-200 CNY/ton.

Zhuo Chuang analyst Li Xundong also said that the national weekly average price of LNG was 5,669.37 CNY/ton last week, down 19.59% month-on-month.

According to the data monitoring of Jinlianchuang, since January 23, the three major LNG receiving stations in North China (national pipeline network Tianjin, Sinopec Tianjin, Hebei Caofeidian) daily troughs have experienced a "cliff-like" decline. On January 26, the total daily volume of the three major LNG receiving stations in North China continued to decline to about 310 vehicles, compared with the 760 vehicles on January 22, a decline of 450 vehicles, a drop of about 60%.

Mitigation of supply and demand mismatch

"Recently, there are three main reasons for the continuous decline in the total daily tank batches of the three major LNG receiving stations in North China. One is that since January 23, affected by the haze weather, many cities in North China upgraded the orange warning of heavy pollution weather to red warning. Most of the industrial terminals such as steel mills and cement plants in the area are closed for holidays. In addition, schools have also concentrated on holidays, resulting in a significant reduction in urban fuel demand. Second, the current pipeline gas is significantly sufficient compared with December 2020 and mid-to-first January 2021. The demand for LNG replenishment has disappeared. Third, starting from January 23, the prices of liquid plants in Hebei and Shandong have dropped to 4300-4500 CNY/ton, and Shanxi and Inner Mongolia have dropped to 3800-4000 CNY/ton. The outbound price of the three major receiving stations is still as high as 4990-5000 CNY/ton, and the price difference of 500-700 CNY/ton is unbearable for downstream users. Therefore, the low-cost resources of surrounding liquid plants have a certain impact on the shipments of LNG receiving stations." Jin Lianchuang analyst Zhang Bin believes.

Tong He also said that although the price fell too fast in the early period and the profit dropped sharply, the liquid factory actively raised the price, but as the Spring Festival approaches, downstream users have an early holiday, purchasing enthusiasm decreases, the demand side may weaken, and the liquid price will continue to rise in the future. 

“Recently, the national average price of LNG has dropped. On the supply side, the temperature rebounded last week, the demand for pipeline gas decreased, the gas supply of factories has recovered, and the supply of LNG has risen steadily; on the demand side, due to the impact of the epidemic, some downstream companies in the north have suspended operations ahead of schedule. , The demand has decreased, and the price of LNG has fallen.” Li Xundong believes that the current domestic natural gas supply and demand situation has eased, and LNG prices have stabilized and declined.

Li Xundong said that the current downstream receiving prices in most parts of the country are on a downward trend. First, due to the increase in domestic resource supply, and second, taking into account the Spring Festival holiday and epidemic factors, some downstream companies have successive holidays, and the amount of industrial and commercial gas consumption has decreased. In addition, Recently, the spot CIF price of LNG in Asia has also declined significantly. Under the influence of multiple factors, the overall market receiving price has been weak.

Short-term LNG may continue to be under pressure

The trend of LNG prices in 2020 was low before high and then high. In the fourth quarter, it rose strongly, and reached its peak in December with violent fluctuations.

Business agency monitoring data show that at the beginning of 2020, the mainstream domestic LNG mainstream price was 3743 CNY/ton, and at the end of the year (December 11), the domestic mainstream LNG mainstream average price was 5366 CNY/ton, an increase of 1623 yuan from the beginning of the year, an increase of 43.37% during the year. The lowest point of domestic LNG quotations in 2020 appeared in early September, with the lowest price of 2,350 yuan.

Now that the price of LNG has fallen in the near future, is there still a possibility of a price recovery?

"At present, the three major LNG receiving stations in North China have a medium level, and some are at a low level. There is no inventory pressure in the short term. However, the year's end is approaching, and downstream demand will continue to decline. It is expected to The listed prices of large LNG receiving stations may fall.” Zhang Bin believes.

Tong He also said that near the end of the month, the temperature drops, and the northern area welcomes the rain and snow again. The demand for urban fuels has rebounded. The pressure on the shipment of liquid plants is not strong, and the price is actively raised. In the short term, liquid prices are still expected to rise, but the year will be closed. At this point, downstream users have continued to stop work for holidays, their purchasing enthusiasm has declined, the demand side may weaken, and the liquid price will continue to lack momentum in the market outlook.

Li Xundong also said that on the supply side, the gas supply of the factory has increased, the operating load has increased, and the liquid level of the factory has increased recently, it is expected that the supply of domestic resources will be sufficient in the future; on the demand side, the city gas supply The increase in supply and the continued rise in temperature have led to a continuous decrease in the demand for LNG city gas peak shaving. In terms of industry and vehicles, due to the prevention and control of public health incidents, downstream end users in many regions are expected to stop work early, and the purchase volume of industrial users has declined. Demand has also continued to fall. Based on the overall supply and demand situation, it is expected that LNG market prices may continue to be under pressure in the short term.