April 8, 2024

China’s Huagang LNG terminal eyes startup in June-July, seeks commissioning cargo

The planned 3 mtpa Huagang LNG receiving terminal in China’s eastern Zhejiang province is hoping to start commissioning operations by mid-year, with the timing dependent on it securing an LNG commissioning cargo before then.

Market participants said terminal developer Huafeng (or Huafon LNG) has begun discussions on procuring an LNG cargo to commission the terminal, which was completed at the end of last year. However, the firm is waiting for spot prices to retreat before committing to a purchase, which could delay the terminal’s commissioning to sometime during the second-half of the year, they said.

Chinese buyers are hoping for an easing in spot LNG prices to the $8s/mmBtu, where they last traded around mid-March, or lower. Prices in the $8s/mmBtu generated strong buying interest among buyers across Asia, including power utilities in China and India, as LNG prices in the $8s/mmBtu and below are workable for power generation.

Spot prices for LNG deliveries to northeast Asia in June are pegged at around mid-$9/mmBtu today, according to traders. The front-month JKM futures contract settled at $9.50/mmBtu yesterday, up from $9.46/mmBtu a day earlier.

Huagang will be the fifth LNG import terminal in Zhejiang, after CNOOCs 6 mtpa Ningbo, ENN’s 5 mtpa Zhoushan and the 3.2 mtpa Wenzhou.

And there arearound seven other new LNG import terminals that are expected to come online in the country this year. These include the 3 mtpa Zhangzhou in Fujian, 6 mtpa Huaying and 1 mtpa Chaozhou in Guangdong, 5 mtpa Longkou Nanshan and 5 mtpa Yantai LNG in Shandong, 1.5 mtpa Wuhu LNG in Anhui and 3 mtpa Rudong LNG in Jiangsu.

While these new terminals will boost China’s import capacity, market participants suggest that the new import infrastructure may not necessarily translate to a sharp increase in China’s LNG imports this year, given a relatively fragile economy and ample domestic gas output.

The Purchasing Managers’ Index, which assesses the strength of a country’s manufacturing and services sectors, rose to 50.8 in March from 49.1 in February. This is the first time the index has been above 50 since September 2023 when it stood at 50.2, according to data released by China’s National Bureau of Statistics (NBS) on Apr. 1. A PMI reading above 50 indicates growth in the economy, while a reading below that number signifies a contraction.

China gas output has been on the rise and increased by about 6% on-year to 41.7 billion m3 in the first two months of this year, according to data from NBS. China produced about 230 billion m3 of gas last year, up by about 5.8% from the previous year, based on NBS data.

A few Chinese firms including Shenzhen Gas recently signed 10-year deals to purchase pipeline gas from PetroChina, which could limit their demand for spot LNG. A source at one of the firms that signed a gas supply agreement with PetroChina said the contract price equated to around $8.50/mmBtu.

According to Kpler data, China received 20.45 mt of LNG in the first quarter of this year, up by by 24% from 16.47 mt during the same period last year.

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