Domestic LNG Prices Plummet! Average Price in October Drops 7.34%, Market Supply Surplus, Inventory Pressure Surge!

Since the end of this year's heating season, the domestic liquefied natural gas (LNG) market price reached its highest for the year in early September at $5,323 per ton, $759 higher than the current average price. Since October, domestic LNG prices have continued to fall, compared with the general downward trend of international sea gas prices, domestic gas prices have fallen more significantly, and the price bottom line has been moving downward. The average price of domestic gas in October was 4,724 CNY per ton, down 7.34 percent from September. Meanwhile, the average price of sea gas at receiving stations was 5,132 CNY per ton, down 2.06 percent from September. Market supply is loose, downstream demand is weak, resulting in downstream users are only willing to buy when the price rises, and lack of purchase willingness when the price falls. Even in terms of demand for auto natural gas, filling stations are cutting back on purchases because of concerns that falling prices will lead to upside down profits.

Since October, the supply of the domestic LNG market has continued to exceed demand, although some regional city gas companies have increased purchases for winter reserves, and LNG factories have stimulated sales through profit promotion, the contradiction between supply and demand has eased, but the overall oversupply situation has not been fundamentally reversed.

On the supply side, LNG plant production remains high due to sufficient domestic gas sources; In terms of Marine gas, due to the intensive arrival of ships to Hong Kong, receiving stations began to actively reduce the price of sales, affecting the sales scope of domestic gas. Overall supply is steady but rising. During this period, the domestic LNG market supply reached 825,900 tons, an increase of 1.44% over the previous cycle.

In terms of demand, some city gas companies have purchased a small amount of LNG for winter supply, and downstream vehicle demand is acceptable, supporting the overall demand growth. During this period, the domestic LNG market consumption reached 801,400 tons, an increase of 4.46% over the previous cycle.

Since October, some of the liquefaction plants that undertake the task of guaranteeing supplies have begun to stock up, while some liquefaction plants with larger tank capacities have taken the initiative to stock up when prices are low in anticipation of a price rebound. However, due to the continued high temperature and weak downstream demand, other liquefaction plants with no guaranteed supply tasks, small storage tank capacity or no desire to stockpile goods rose in the liquid level after the end of the 11th holiday, and the continuous falling market failed to stimulate downstream procurement enthusiasm, and the inventory pressure was difficult to ease. As of the end of October, the total inventory of domestic LNG plants reached 590,000 tons, an increase of 38% from the previous month, and the storage ratio reached 39%, an increase of 10 percentage points from the previous month. The increase in inventories was concentrated in the north, the main producer of LNG plants. Compared with the beginning of October, inventories in Northwest China increased by 32.4%, in North China by 33.46%, and in Southwest China by 5.54%.

In October, a total of four raw material gas auctions were conducted in the northern main producing areas, and in addition to pre-sales, they were also added to the auction in the early ten days, the middle and late months, and the middle of one. The supply of air source is sufficient, and the gas volume of raw materials is increased. In October, the overall transaction range of the gas source auction was 2.67-3.07 CNY per party, which was equivalent to an average price of 4980 CNY per ton of factory production costs. The average monthly price of the main producing factories was 4,724 CNY per ton, down 7.34% from September. According to the price, cost and profit calculation of the Inner Mongolia factory sampled by Longzhong, the factory profit in October was -182 CNY per ton, a decrease of 537 CNY from the previous month.

With the approach of the comprehensive heating season, there is usually an upstream gas reduction operation for some liquefaction plants in November, but according to Long's understanding, due to the adequate supply of pipeline gas this year, and the temperature continues to be high, the liquefaction plant is currently not reduced. At present, the liquid level of domestic LNG plants is generally high, the output remains high, and the destocking of factories is difficult, and the high inventory puts pressure on the price.

In addition, in the first half of November, the gas source auction transaction price is far lower than the presale price, and the market is generally bearish. At the same time, the sea and gas market resources are abundant, the shipping schedule is relatively dense, and the overall inventory of the receiving station is high.

Under the influence of multiple negative factors, the market lacks favorable factors, and it is expected that LNG prices will still face downward pressure before the heating starts in full swing.