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Chinese February LNG Demand Continues Growth Trend

Chinese LNG offtakes­­ in February have continued to grow as the government is keen to reinvigorate industrial output. Meanwhile, price conscious buyers in Southeast Asia and the Caribbean are taking advantage of record low prices and soak up some of the excess supply.

On an annual and monthly basis, Chinese LNG demand remains robust

Following rapid import growth in 2019, offtakes in January 2020 had decreased by almost 11% compared to 2019 but were nonetheless 21% higher than in January 2018. When comparing February imports, Chinese LNG offtakes were more than 21% higher this year compared to the same period last year, thus somewhat compensating for the y/y reduction seen in January. Accordingly, our latest data indicates China’s LNG offtakes stood at 5.11mmt on 29th February.

China maintained growth trajectory in February despite coronavirus

When adopting a more granular view, recent imports have accelerated y/y. Although China saw 18 LNG offtakes over the last seven days of February 2019 compared to only 16 over the same period this year, the extra day in February 2020 helped to augment overall imports. Consequently, despite the coronavirus outbreak, China’s LNG in February have maintained a consistent growth trajectory since 2018 as the Chinese government is keen to reinvigorate industrial output as much and as quickly as possible following various public health measures that restricted the Chinese economy for several weeks.

Growth despite increase in cargo delays

Importantly, the rise in y/y imports in February was by and large not due to delays originating in January. This does not mean there were no delays at all (presumably reduced staff at various terminals were a contributing factor) but where they occurred the affected vessels still arrived within the month they were supposed to. An isolated case of an inter-month delay was that of the Methane Patricia Camila, which arrived at Zhejiang LNG 4 days late on 3rd February.

Nevertheless, we have also observed an increase in in-month delays for cargoes en route to China. For example, the Al Samriya has stopped just north of Shanghai, having originally been scheduled to arrive at Jiangsu on 21st February.

Some previously thought diversions have also turned out to be mere delays. For example, the Beidou Star was scheduled to ship a QCLNG cargo to the Tianjin area and has since arrived at Caofeidian LNG with a three-day delay. Similarly, the Nigerian LNG Abalamabie, previously waiting off Shanghai, has since arrived at the terminal, also with a three-day delay.

There were relatively few diversions…

However, the Marvel Pelican, which arrived but was then turned away from Zhejiang LNG on 13th February, has taken its cargo to Dahej in India with arrival on 1st March. The Pan Africa, originally destined for Zhejiang LNG, has cancelled its wait just outside Chinese territorial waters that had lasted for more than a week. The vessel is now waiting off Singapore, presumably waiting to return to China.

…but some cargoes were cancelled, and vessels have been idled

Despite Chinese buyers being content with extended charters due to longer waiting times instead of rushing to declare force majeure, some cargoes were not shipped in the first place and vessels idled. For example, the Dukhan, out of repair at Singapore, has yet to return to Ras Laffan to pick up a cargo whilst the Dapeng Moon has been idling off Dampier since 11th February.

Delays not just in the Far East

We highlight that long delays are not just occurring in the Far East. The UK especially seems to have difficulty in receiving the high volume of LNG cargoes arriving from Qatar, the United States and elsewhere. For example, the Gaslog Greece has had to wait for 8 days to dock at Dragon LNG on 27th February whilst the Gaslog Glasgow ‘threw in the towel’ and has taken a new course south, potentially to the Pacific. Other vessels such as the Mekaines are still waiting off the Welsh coast.

The relative sluggishness with which LNG is currently received in the Atlantic and the Pacific has allowed traditionally price conscious buyers in countries such as India and the Caribbean to stock up on LNG. Accordingly, imports for buyers in India, Pakistan, Thailand and the Caribbean grew by 1.24mmt (24%) y/y. India in particular has put all of its LNG capacity sites to use to take advantage of record-low prices.