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China LNG imports set to hit record in November

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Reuters are reporting that China’s imports of LNG are set to hit record levels in November, with demand due to peak over the cold winter months as millions of households shift from burning coal for heating to using gas, driving up prices for the fuel.

Although the world’s second largest economy has significant local gas reserves and can also import via pipelines, most of the jump in demand will be met by LNG tankers.

Shipping data in Thomson Reuters Eikon shows Chinese LNG imports will reach 4 million t for the first time in November, breaking the 3.7-million t record from last December.

That comes as swathes of residents across northeast China have had their households converted from coal to natural gas for heating this winter.

A colder-than-usual start to winter is also stoking appetite for gas, with Thomson Reuters Eikon data showing the particularly frigid spell will last until at least mid-December.

Growing appetite for gas pushed domestic LNG prices to record highs of over US$1060 per t this week.

Although China’s LNG demand is still only half that of top consumer Japan, traders say China has become the key driver of Asian spot LNG prices, which have jumped by 80% from mid-2017 to almost US$10 per million British thermal units, their highest since January, 2015.

Surging Chinese demand has tightened Asian LNG markets, which since 2014 have been marked by oversupply on the back of rising exports.

Going into 2018, analysts say much will depend on the speed of a production ramp-up in Australia, where the last of a number of mega-projects is being completed after more than a decade and at a cost of well over US$200 billion.

Australian exports stood at 52 million t in 2016.

With Royal Dutch Shell’s Prelude FLNG project in Western Australia and Ichthys, a massive project led by Japan’s Inpex in the north of Australia, about to be completed, Australia’s export capacity could hit 85 million t next year, topping that of current leader Qatar.

Traders said Australia’s rising capacity would ensure LNG markets will remain well supplied, despite China’s thirst.

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