Shanxi LNG market outlook is weak

Since May, affected by the low price promotion of overseas imported natural gas (sea gas), the sales radius of Shanxi liquefied natural gas (LNG) resources has continued to narrow. As of June 6, the average price of mainstream LNG in Shanxi was 3,517 yuan (ton price, the same below), making it the lowest point of LNG prices since 2023. However, the price of LNG in Shanxi has recently fluctuated with the price increase of sea gas. As of June 16, the average price of mainstream LNG in Shanxi was 4,015 yuan, an increase of 498 yuan from June 6.

"Sea gas rises, sea gas falls. Shanxi's LNG price rise and previous decline are both affected by sea gas prices. However, since downstream demand has not changed substantially, Shanxi's LNG market outlook is weak." Shanxi Topography Guo Wenqiang, Operation Director of Kun Energy Technology Co., Ltd. analyzed.

Obviously affected by air and sea

According to the data of Jinlianchuang, the share of Seagas in the domestic LNG market has increased to about 42%, so the price of Seagas has a significant impact on the domestic LNG market. On June 16, the CIF spot price of Sea Air was 4,289 yuan, an increase of more than 1,000 yuan from June 6.

"This domestic LNG price increase is more motivated by the impact of the European market. However, it should be noted that the global LNG oversupply situation has not improved significantly. According to the European Gas Infrastructure Organization (GIE) European natural gas inventories show that as of June 14, European natural gas inventories were 72.91%, significantly higher than the same period in previous years. Due to the limited receiving capacity of European LNG, the underlying logic for the continued upward trend of the international natural gas market in the future is still not solid enough.” Zhuo Chuang Information Analyst Du Cheng said.

The main domestic LNG consumption areas are in North China, East China and South China. Sea-air receiving stations are mostly located here, which has obvious geographical advantages. Therefore, once the price of sea gas falls, the consumption area will give priority to sea gas resources with price advantages.

"Shanxi is a province where LNG resources are outflowed. The sales areas outside the province mainly include Henan, Hebei, Shandong, Jiangsu, Anhui, etc., and they will also be sold to Zhejiang and even South China markets when encountering special conditions. If the sea-gas receiving station leaves the station The price is relatively low, the price difference between sea and land is narrowing, and the cross-regional arbitrage space of liquid plants in the region is narrowed or closed in stages, which will reduce customers' enthusiasm for Shanxi LNG purchases." Du Cheng said.

Competition for surrounding resources

Shanxi's LNG gas source is mainly coalbed methane, and the low price of coalbed methane gives Shanxi LNG a certain advantage in terms of cost. However, if the arbitrage space narrows, the outflow of goods from Shanxi will be hindered.

"Taking May 31st as an example, the ex-factory price of the main liquid factory in Shanxi was 3,700-3,850 yuan, while the delivery price in northern Jiangsu was 4,000-4,100 yuan. The arbitrage space between the two places has shrunk to around -80 yuan, and the arbitrage window is closed. Therefore, resources in Shanxi can only flow to Anhui, and the price advantage is weakened. At the same time, the window for Shanxi LNG to flow to Shijiazhuang, Hebei is closed, and the sales radius of liquid plants in Shanxi continues to narrow. In mid-to-late May, LNG is mostly digested locally and in Henan , the amount of resources flowing out to places such as Hebei and Anhui has shrunk." said Yang Yan, an analyst at Jinlianchuang Information.

Although Shanxi is located in the "middle" zone between the main LNG consumption area and the main production area, it has certain regional advantages. However, because the surrounding provinces of Shaanxi and Inner Mongolia are close to gas sources, the price of LNG raw material gas is relatively low, so the low-priced resources in Shaanxi and Mongolia will flow into Shanxi, and the contradiction of oversupply in the region is highlighted. In order to maintain low inventory and normal shipments, the price of Shanxi Liquid Plant can only continue to fluctuate at a low level.

From the analysis of consumption structure data, LNG consumption for transportation in Shanxi accounts for a relatively high proportion, exceeding 50%, which is mainly used for the transportation needs of coal mines and other industries. "Rising gas prices have put pressure on freight, so LNG long-distance transportation volume has declined, and the sales channel of Shanxi LNG "Northern Gas" going south is still blocked." Guo Wenqiang said.

At present, the outflow of LNG resources in Shanxi is hindered, and the demand in Henan, the main sales place, is expected to decrease. In June, downstream users switched back to pipeline gas. The main force is to digest the gas volume in the contract, and the purchase of LNG has been greatly reduced.

The main reason is oversupply

Industry insiders believe that the market atmosphere of oversupply has led to a continuous decline in LNG prices.

"From January to May, the production of LNG in Northwest China was 4,764,700 tons, a year-on-year increase of 16.22%. With the increase in domestic supply, about 100 tons of sea-gas will arrive onshore every week, while the weekly domestic LNG The demand is only 700,000 to 800,000 tons, and the supply is far greater than the demand." Guo Wenqiang said.

"Shanxi LNG flows more to Hebei, Henan and other places. LNG refueling stations, industrial point supply and urban fuel storage demand are the main factors affecting the price of Shanxi LNG." Du Cheng said.

"As the weather warms up, LNG loses its role in urban fuel peak shaving. In terms of LNG gas stations, a few gas stations are currently producing and selling well, but most gas stations are still difficult to sell." Guo Wenqiang said.

In addition, LNG for transportation in Shanxi accounts for more than 50% of the total. Due to restrictions on transportation, the transaction volume of the LNG market has declined, and the price has further dropped.

On the whole, under the comprehensive pressure of no substantial change in downstream demand and excessive supply, Shanxi LNG prices will be weak in the future. (Wang Hongzhen)