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Australia sees record export values and China two-year LNG surge with spot price of $3.70

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Australia forecasts that its energy and commodities export values are heading for a record of almost A$300 billion (US$174Bln) in 2019-2020, boosted by products like LNG and thermal coal, and predicted that China would be the largest LNG importer by 2022 and LNG spot prices his year would average $3.70 per million British thermal units.

The value of Australia’s growing oil, condensate and LNG exports will all move with the oil price as 75 percent of its LNG is sold under contract at prices linked to Japanese customs cleared oil prices.

“Assuming China’s economy is largely back to normal by the second half of 2020, these moves are likely to be fully unwound by then. Thereafter, supply issues will largely drive price moves,” said the Australian report from the Office of the Chief Economist.

Despite the short-term setbacks of the coronavirus and the oil price slump, China’s LNG imports are projected to rise to 99 million tonnes by 2025, while overtaking Japan as the world’s largest importer of LNG by 2022. 

Australia outlined on eof the reasons for its record commodities export values as the Australian dollar losing ground against the US currency.

“Iron ore prices have steadied at high levels, as supply problems offset demand worries. Coal prices have steadied after the sharp declines of 2019. Base and precious metal prices have wavered (in opposite directions), on concerns about the coronavirus outbreak,” it said.

“Offsetting the impact of weaker prices, both higher export volumes and a lower-than-expected Australian dollar are likely to see Australia’s resource and energy exports set a record A$299 billion (US$173Bln) in 2019-2020,” explained the report.

“A 4.2 percent fall in prices was more than offset by a 13.1 percent rise in volumes,” it added.

“In 2019-2020, resource and energy exports are forecast to set a record of $299Bln, as a 0.5 percent fall in prices is more than offset by a 7.5 percent rise in volumes,” said the report.

Australia’s LNG export volumes are forecast to rise from 75MT in 2018-2019 to 81MT in 2020-2021, before edging back down to 80MT by 2024-2025.

“Ongoing overcapacity in global LNG markets is expected to constrain the extent of any price recovery over the next two years,” it added.

The Australians noted that the Asian LNG spot price averaged US$3.94 per million British thermal units (A$5.47 per gigajoule) in the first two months of 2020, 31 percent lower from the December 2019 quarter and 47 percent lower year-on-year. 

“Asian LNG spot prices are forecast to remain low over the first half of 2020, before lifting in the second half of the year to average US$3.70 per MMBtu (A$5.10 per gigajoule) for 2020,” it stated.

“The benchmark Australian thermal coal spot price, the Newcastle 6,000 kcal/kg NAR (Net As Received) – stabilised in the US$60-US$70 a tonne range in the first quarter of 2020, after steadily falling from a peak of US$120 a tonne in mid-2018,” said the report.

“By late February 2020, the vast majority of China’s thermal coal capacity had reportedly resumed production,” it added.

LNG accounted for around 27 percent of China’s gas consumption in 2019, and is expected to continue to play a major role in meeting China’s rapidly rising needs for gas.

“The role of gas in China’s energy mix will reportedly be a key theme in China’s 14th Five-Year Plan, which will be released later this year,” added the report.

China’s gas demand will also be met by growth in domestic gas production, which accounted for 57 percent of gas consumption in 2019, and pipeline imports covering 16 percent of gas needs last year.

“China produced 175 Bcm of gas in 2019, an increase of 10 percent from 2018. Domestic gas production will need to increase by 18 percent this year in order for the country to meet the 2020 production target of 207 Bcm,” according to the Australians.