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Liquefied natural gas buyers in Northern China are concerned virus-linked curbs on travel and industry will persist through summer, further limiting demand.
Respondents to a government survey expect LNG imports in Northern China, which accounts for about a third of the nation’s deliveries, to drop by at least 20% for the three months through August compared with a year earlier, according to people familiar with the results.
Virus restrictions are expected to curb loading of trucked LNG shipments and reduce factory operations, while high overseas spot LNG prices will also weigh on demand, said the people, who requested anonymity as the survey results haven’t been made public.
Buyers canvassed in the survey said demand could drop as much as 45% under a worst-case scenario that includes months of lockdowns, according to one of the people.
Northern China is home to the capital of Beijing, where a recent jump in Covid-19 cases triggered some restrictions and mass testing. China — the world’s biggest LNG importer last year — has stuck to its Covid Zero approach to quell outbreaks, weighing on energy consumption.
The weak outlook for LNG demand shows how China’s utilities expect the lockdowns throughout the country — which have confined millions of residents to their homes for more than a month — won’t be eased soon. Meanwhile, higher-than-normal spot LNG rates will also curb additional fuel procurement and weigh on imports this summer, the people said.
Lower Chinese imports will provide some relief to gas buyers in South Asia and Europe, which had been grappling with the sky-high prices. European nations are seeking to curb dependence on Russian pipeline supplies, and will need to maximize LNG imports this summer to refill inventories in time for winter.
China’s biggest gas importers have already curbed purchases in the past year due to the high spot prices, mild winter weather and lackluster demand. The country’s LNG imports were down nearly 20% in the first four months of the year from the same period in 2021, ship-tracking data compiled by Bloomberg show.
To be sure, China’s utilities believe it’s likely LNG demand will rebound after August, as lockdowns are expected to be largely done by then, according to one of the people. That could set the stage for higher Chinese imports in the winter, when global demand for the fuel peaks.
