Despite recovery in China’s natural gas demand during the first six months of the year, a continued slowdown in economic activity is casting doubt on whether growth can continue into 2025.
A property slump and lower consumer spending resulted in China's economy growing by about 4% year-on-year in July, short of China’s 5% annual target. However, lower global LNG spot prices saw more cargoes delivered to China, as well as more volumes from new long-term contracts coming into effect this year.
Total liquefied natural gas imports to China rose by 11% to 37.9 million metric tons (mmt) in the first half of 2024 compared to 34.4 mmt during the same period last year, according to Kpler data. U.S. LNG exports jumped to 1.87 mmt in the first half of year, a 70% increase compared to 1.09 mmt imported during the same period last year.
But the economic headwinds are starting to bite again, according to Poten & Partners’ Jason Feer, global head of business intelligence.
“China has reloaded about 2.5 mmt of LNG so far this year, roughly on pace with last year –and may have resold some cargoes before they reached China– so the importers have been working to manage supply,” Feer said.
Poten and Partners forecast China’s LNG imports will soften in the second half of this year and will see slower demand growth over the next 12 months. Demand growth could dip to 2.5% year-on-year, well below double digit growth seen over the previous 12 months.
UK consultancy EnergyAspects expects Chinese LNG demand growth to slow in the second half, compared to the first half 2024, head of Asia LNG Min Na told NGI.
Na explained “part of the reasons behind the slowdown is higher gas prices. We forecast the Japan-Korea Marker will outturn $15.70/ MMBtu over this winter, compared to an average of $10.97/ MMBtu this summer and $13.44/MMBtu last winter.”
The International Energy Agency (IEA) wrote in a third quarter gas market report that strong growth in early 2024 and upward revisions to full-year economic forecasts suggest that Chinese gas demand growth could reach 8% in 2024.
But the IEA also warned that “conflicting manufacturing activity indicators in Q2 and uncertain expectations for the construction sector and overall industrial activity growth remain potential downside risks to the outlook.“
Columbia University’s Erica Downes, a senior research scholar at the Center on Global Energy Policy told NGI, “whether or not China's LNG imports will reach record levels – as a PetroChina official said might happen in July – will depend on a number of factors, including how cold the weather gets towards the end of the year and the competitiveness of LNG prices as compared to coal and diesel.”
Natural gas pipeline imports from Russia increased to around 22-23 billion cubic meters (Bcm), on par with Russia’s commitment to eventually deliver up to the contractual level of 30 bcm in 2024.
“Russia almost certainly will be the key driver of growth in pipeline imports because Power of Siberia 1 is still ramping up to full capacity and because Russian pipeline gas is one of China's cheapest sources of imported gas,” Downes said.
While economic activity and increases in renewable generation could be weighing on gas demand from China’s power sector, other sources of consumption have been opening up a possible path to growth.
Sales of LNG-powered trucks and other heavy equipment in China have risen to record levels over the year as price differentials between trucked LNG and diesel offer more market advantages.
“LNG is beginning to have a material substitution effect on transport diesel,” David Hewitt of Hewitt Energy Perspectives told NGI. “The second half of 2024 will also see yet more regasification capacity come online – so relative LNG prices will be important.”
