LNG Divergence and Trend Forecast


Release time:

2022-12-20

During the year, as China entered the heating season in full swing, all parties actively fought the winter heating defense war, and this winter and next spring natural gas winter supply guarantee speed up the sprint. Domestic production increase speed, imports, especially LNG imports continue to maintain a higher growth rate, interconnection projects continue to promote, it is also worth mentioning that in 2019, the requirements for the utilization and construction of gas storage reservoirs are higher than in previous years, and on the whole, the development of the natural gas market in 2019 is more stable. As of November 27, 2019 the national average price of LNG was RMB 4,259.41 per ton, down 6.18% year-on-year in 2018 and 28.62% year-on-year in 2017.

[Introduction] During the year, as China fully enters the heating season, all parties actively fight the winter heating defense war, this winter and next spring natural gas winter supply guarantee speed sprint. Domestic production increase speeds up, imports, especially LNG imports continue to maintain a higher growth rate, interconnection projects continue to promote, in addition, it is worth mentioning that in 2019, the requirements for the utilization and construction of gas storage reservoirs are higher than in previous years, and on the whole, the development of the natural gas market in 2019 is more stable. As of November 27, 2019 the national average price of LNG was RMB 4,259.41 per ton, down 6.18% compared to 2018 and down 28.62% compared to 2017.

I. Analysis of LNG operation

In 2019, the macro economy is generally running smoothly, and on the supply side, from the domestic self-production point of view, in January-October 2019, the average plant start rate was 45.78%, up 22.44% year-on-year, with a large increase; since October 15, PetroChina has carried out four feedstock gas auctions for some of the Northwest region's directly supplied users, with a cumulative bidding volume of 490 million cubic meters of resources; on the imported gas side, in 2019, 1 -September, China imported a total of 43,599,700 tons of LNG, an increase of 18.69% year-on-year, and 27,828,500 tons of PNG imports, an increase of 0.11% year-on-year.

On the demand side, China's apparent natural gas consumption totaled 223.19 billion cubic meters in January-September 2019, up 9.59% year-on-year, with a sizable consumption growth rate, and the annual growth rate in 2019 is expected to remain at around 10%.

Off-season LNG prices in China more than maintained at 3200-3800 yuan / ton, domestic LNG prices since the end of the National Day appeared rising trend, the end of October prices rose "excessive", November 1, the national average price of 528 yuan / ton rose to 4328 yuan / ton, upward amplitude of the subsequent wave of downward adjustments accompanied by a wave of downward adjustments as of 11 Down 316 yuan / ton fell to 4011 yuan / ton. After the beginning of the middle of the country's wide range of heating began, the market price should be upward, November 18 rose to 4266 yuan / ton, after the current temperature is not particularly noticeable cooling appeared, the market price is mainly to oscillate and stabilize the main. As of November 27, the national average price of LNG was RMB 4,259.41/mt, up 0.47% year-on-year, while the average price of LNG in Shandong province was RMB 4,025/mt, down 8% year-on-year and unchanged year-on-year.

PetroChina on the 28th of Inner Mongolia, Ningxia, direct supply of LNG plants to implement the first half of December natural gas feedstock auction, auction total tentatively 0.9 billion square meters of natural gas, the starting price of 1.57 yuan / square, the highest declared limit of 2.51 yuan / square, than the last auction limit up 0.13 yuan / square, the highest volume of a single transaction of 15 million square meters. The auction news, Ningxia part of the liquid plant is worried about not getting gas source lead to shutdown, so the price increase in advance, pulling the 27th national average price of LNG slightly upward, "bidding shall not" as well as the "maximum limit price" of the upward fluctuation, to a certain extent exacerbate the market For the winter supply cost expectations, but this does not mean that the tight winter gas supply situation, by the industry to push up the mentality and the impact of falling temperatures, is expected to later still have a certain amount of space for upward fluctuations.

Second, LNG price volatility analysis

LNG market price trends can basically reflect the overall supply and demand situation of natural gas in the country, the main factors affecting the following:

1, the impact of gas prices. Pipeline gas supply during the year is stable and relatively abundant, so far, there is no domestic gas restrictions. And this year, residential gas prices are no longer floating, non-residential natural gas prices are also increasingly reflecting the market-oriented attributes, bidding for gas purchase mode turnover compared to last year more frequently.

October 15, PetroChina auction final price of 1.63-1.78 yuan / square, the starting low price of 1.41, bidding volume of 180 million cubic meters, each plant shot 20-80% of the capacity;

On October 30, PetroChina's second bidding transaction price of 2.6-2.75 yuan per cubic meter, bidding volume of 100 million cubic meters, accounting for 30% of the participating capacity;

November 14, PetroChina three bidding maximum price of 2.38 yuan / square, bidding volume of 120 million, the first field volume of 80 million cubic meters, the transaction price of 2.2 or so, the highest price of 2.25, the production cost of about 4,000 yuan / ton. The second volume of 40 million square meters, all sold at a capped price of 2.38 yuan / square;

November 28, Ningxia, Inner Mongolia direct supply auction, plan to auction gas volume of 0.9 billion cubic meters, the starting price of 1.57 yuan / square, the highest declared limit price of 2.51 yuan / square, than the last auction limit price up 0.13 yuan / square, the highest single transaction volume of 15 million cubic meters.

Auction mode more reflective of market-oriented attributes, more responsive to the market supply and demand status quo, the overall cost of gas sources is expected to be compared to last year or up, so it is expected that the LNG market price this winter compared to last year or up.

In addition, on December 2, the northern section of the China-Russia East Route project will be put into operation as scheduled, which will alleviate the pressure on natural gas resources in Northeast and North China to a certain extent, and will indirectly affect LNG prices in the region to a certain extent.

2, the market supply and demand impact. November 11 before most parts of the country did not enter the heating season, and by the El Niño phenomenon, the domestic did not appear a large area of cooling, the short-term market demand is not as optimistic as expected; the current upstream supply of the corresponding relatively abundant, liquid plant out of the pressure of the inventory of the shipment of profits, so in early November in the regions of the LNG prices are mainly downward mainly; the beginning of domestic heating, the weather is getting colder and colder. In the middle of the month, domestic heating, the weather is getting cold, the downstream demand obviously picks up, the market price also has upward; in the second half of November, there is no obvious cold weather, the supply is also relatively abundant, the market price is mainly to oscillate and stabilize.

3, the impact of heavily polluted weather. in mid to late November, Hebei, Shandong, Henan, many provinces and cities to start the heavy pollution weather warning, at the same time, "pressure on non-people" policy, LNG non-residential gas demand is limited; but since 2019, the domestic natural gas downstream to promote the use of more reasonable, more flexible, winter demand increment, although it will not appear again! As in 2017, the surge in winter demand will not occur again, but under the model of "supply and change", it is expected to increase compared with 2018.

4. Impact of cooling weather. The impact of temperature on winter natural gas demand is still relatively large, in Beijing, for example, every 1 ℃ drop in temperature, natural gas demand is expected to have an incremental demand of 3 million cubic meters. As we enter December, the weather temperature gradually decline, plus the fourth round of PetroChina raw gas cost increase, LNG prices are expected to usher in a new wave of increases.

Third, the impact on related industries

At present, the supply of LNG in 2019 is relatively abundant, and the price has declined compared with the previous two years. Under the dual stimulus of stable gas source and low price, LNG automotive may usher in rapid development. Stabilization of domestic gas sources means that prices are more stable, and the economy of LNG is significantly better than diesel, coupled with July 2019, the implementation of the National Six standard for LNG heavy trucks, the LNG automotive market may usher in new development opportunities.

Fourth, the future price trend forecast

First of all, we are still relatively optimistic about the LNG market this winter.

For the future market, we believe that this year's LNG market situation is better than last year, the average price of LNG in winter is expected to be slightly higher than last year, we expect that the average price level in winter this year or more than 4,800 yuan / ton, about 4,600 yuan / ton in 2018.

The main considerations are as follows:

First, in 2017, "coal to gas" implementation efforts are too large, resulting in a significant shortage of market resources, which makes the 2017 winter price is unusually high; in 2018, we are worried about continuing to reproduce the phenomenon of resource scarcity in 2017, the upstream gas supplier took a series of measures in advance to cope with the gas storage reservoir injection in April, the domestic gas pipeline off-season gas restriction, which is the main reason for the increase in the average price of this year. Pipeline off-season gas restriction, which caused the special phenomenon of "off-season is not slow" and "peak season is not prosperous" in 2018, which made the winter price in 2018 appear a continuous downward trend, and this price level is actually formed in a relatively special environment. Therefore, as a base volume, there is a greater likelihood of year-on-year price increases in the winter of 2019.

Secondly, the 2019 annual supply is relatively abundant, coupled with the relatively low price advantage, is more conducive to the downstream promotion of "coal to gas" to implement a more flexible, specifically to take the appropriate gas is gas, the appropriate electricity is electricity, the appropriate coal is coal, the strict implementation of the "to gas to change "" first set up and then broken ", multi-measures to promote clean heating in an orderly manner. At the same time, taking into account the impact of trade friction between China and the United States, the domestic economic environment slowed down slightly, under the premise of abundant supply, the appropriate release of a part of the "pressure non-" demand is also possible.