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PR Newswire
10-07-2014, 12:12 AM
Asia LNG prices hit 3-year low
DOW JONES NEWSWIRES JULY 10, 2014 1:00AM
The price of liquefied natural gas in Asia has plunged by nearly half over the past five months -- to the lowest level in more than three years -- as Japan and South Korea have slowed fresh purchases and supply has risen.
Dealers say the drop has forced some to sell shipments at a loss, and analysts say that if the price stays at current levels Asian buyers may be less willing to commit to planned billion-dollar export projects in the US, Canada and Australia.
South Korea and Japan are the world's two biggest buyers of LNG, natural gas that is super-chilled into liquid form for shipping and storage, but both countries have slowed buying.
South Korea has been hoarding gas since last winter, when its nuclear power plants went offline after a safety scandal. Now those plants are restarting and state-run importer Korea Gas Corp, or Kogas, is running down stock levels because it overbought.
In Japan, which became the world's biggest LNG buyer after the 2011 Fukushima nuclear disaster shut down a third of the country's electricity generation, recently bought tanker cargoes of LNG for delivery in the second half of August and September.
The price of LNG cargoes on the Asian spot market has fallen to less than $US11 per million British thermal units, almost half of the $US20 price in February, traders say. The latest price according to the Platts Japan/Korea Marker on July 9 was at $US10.925 per mBtu, the lowest since March 2011.
An unusually steady supply from producers in Qatar, Australia and Southeast Asia, which haven't seen the usual rate of production outages, has also weighed on prices. Papua New Guinea, too, has been adding to supply after its new plant started production in May, ahead of schedule.
"The situation has been exacerbated because some traders got caught with expensive cargoes -- bought at $14 and which need to be sold at $13 or lower," said Tony Regan, gas consultant at Singapore-based Tri-Zen Consulting.
He said some distressed cargoes -- bought by traders and later offered at a lower price -- have been seen on the market, and buyers have been pushing down bids to take advantage of falling prices.
LNG buyers in Japan and South Korea typically make most of their purchases, accounting for around 80 per cent of their needs, through long-term contracts at fixed prices. The remaining 20 per cent is bought in the open market called the spot market, where prices fluctuate.
North Asian utilities can choose to buy slightly less under these term contracts to allow for seasonal fluctuations. Currently, this has left suppliers such as Australia with extra cargoes to put into the spot market, adding to further downward pressure on prices. Sluggish economic growth in China and India, which use gas in the industrial and transport sectors, has also weighed on prices.
"Looking forward, spot prices will rise when bidding will start for winter cargoes but given the current market sentiment, it is unlikely that we will see price levels similar to last year's levels," said Abhishek Rohatgi, an analyst at consulting firm Enerdata.
DOW JONES NEWSWIRES JULY 10, 2014 1:00AM
The price of liquefied natural gas in Asia has plunged by nearly half over the past five months -- to the lowest level in more than three years -- as Japan and South Korea have slowed fresh purchases and supply has risen.
Dealers say the drop has forced some to sell shipments at a loss, and analysts say that if the price stays at current levels Asian buyers may be less willing to commit to planned billion-dollar export projects in the US, Canada and Australia.
South Korea and Japan are the world's two biggest buyers of LNG, natural gas that is super-chilled into liquid form for shipping and storage, but both countries have slowed buying.
South Korea has been hoarding gas since last winter, when its nuclear power plants went offline after a safety scandal. Now those plants are restarting and state-run importer Korea Gas Corp, or Kogas, is running down stock levels because it overbought.
In Japan, which became the world's biggest LNG buyer after the 2011 Fukushima nuclear disaster shut down a third of the country's electricity generation, recently bought tanker cargoes of LNG for delivery in the second half of August and September.
The price of LNG cargoes on the Asian spot market has fallen to less than $US11 per million British thermal units, almost half of the $US20 price in February, traders say. The latest price according to the Platts Japan/Korea Marker on July 9 was at $US10.925 per mBtu, the lowest since March 2011.
An unusually steady supply from producers in Qatar, Australia and Southeast Asia, which haven't seen the usual rate of production outages, has also weighed on prices. Papua New Guinea, too, has been adding to supply after its new plant started production in May, ahead of schedule.
"The situation has been exacerbated because some traders got caught with expensive cargoes -- bought at $14 and which need to be sold at $13 or lower," said Tony Regan, gas consultant at Singapore-based Tri-Zen Consulting.
He said some distressed cargoes -- bought by traders and later offered at a lower price -- have been seen on the market, and buyers have been pushing down bids to take advantage of falling prices.
LNG buyers in Japan and South Korea typically make most of their purchases, accounting for around 80 per cent of their needs, through long-term contracts at fixed prices. The remaining 20 per cent is bought in the open market called the spot market, where prices fluctuate.
North Asian utilities can choose to buy slightly less under these term contracts to allow for seasonal fluctuations. Currently, this has left suppliers such as Australia with extra cargoes to put into the spot market, adding to further downward pressure on prices. Sluggish economic growth in China and India, which use gas in the industrial and transport sectors, has also weighed on prices.
"Looking forward, spot prices will rise when bidding will start for winter cargoes but given the current market sentiment, it is unlikely that we will see price levels similar to last year's levels," said Abhishek Rohatgi, an analyst at consulting firm Enerdata.