planetcryptonftgame| Zhuo Chuang Information: Why are LNG ex-factory prices rising one after another in the off-season atmosphere?

Zhang Yuru, an information analyst at Zhuochuang

[introduction] usually in the off-season atmospherePlanetcryptonftgameLNG market prices maintained a weak decline, while since the full end of the warm season in late March 2024, China's upstream ex-factory prices have risen one after another and reached a peak in the off-season in mid-May, mostly due to low domestic gas inventories, high raw gas costs and temporary replenishment support in some areas during the conventional maintenance season. Looking forward to the future, under the background of strong supply and weak demand, the price decline in the domestic market is expected to be strong, but the price decline is expected to be limited under the support of international and domestic costs.

First, the ex-factory price of LNG has risen one after another in the off-season atmosphere.

In 2024, since the heating season ended in late March, the average factory price in the upper reaches of China has risen one after another, and reached the peak of the off-season in mid-May. According to Zhuochuang statistics, as of May 11, 2024, the average factory price of the upstream LNG in China was 4341.Planetcryptonftgame.02 yuan / ton, up 421.2 yuan / ton, or 10.75%, compared with 3919.82 yuan / ton at the beginning of April, and 185.22 yuan / ton, or 4.46%, compared with 4155.80 yuan / ton on May 11, 2023, reaching a peak in nearly three months. In previous years, the traditional off-season atmosphere, due to weak demand, the market price is usually a downward trend. To investigate the reason, the continuous rise in the off-season market in 2024 is mostly due to the low domestic gas inventory and high raw gas cost under the conventional maintenance season, coupled with the temporary replenishment support in some areas, which will be analyzed in detail later.

Second, with the advent of the traditional maintenance season, the supply of domestic LNG will be reduced in stages.

According to Zhuochuang Information, the average start-up load rate of the LNG plant in March-May (2020-2024) is 51.56%. As can be seen from figure 2, the factory start-up load rate since March 2024 is much lower than the historical average, and only part of the time has recovered due to the end of factory maintenance, but the overall maintenance capacity is greater than the resumption capacity, and the start-up load rate maintains a weak trend. The reason is that since late March, with the complete end of the heating season in the north, the domestic natural gas market has entered the off-season of traditional demand, inland liquid plants have also entered the maintenance season, and a number of liquid plants with concentrated gas sources have begun to overhaul, the supply of domestic LNG has been phased reduced, the upstream liquid level is controllable, and the inventory is low, therefore, the mentality of domestic liquid factories is relatively strong.

Third, hoarding goods before and after the festival and the improvement of market capacity to support the rise in ex-factory prices.

According to Zhuochuang statistics, national LNG consumption in April 2024 was 3.48 million tons, an increase of 1.69% month-on-month and 22.17% year-on-year. It is estimated that national consumption in May will be 3.57 million tons, an increase of 2.61% month-on-month and 18.36% year-on-year. Although there are traffic restrictions on high-speed dangerous chemicals during the two short holidays of Ching Ming Festival in April and International Labour Day in May, the behavior of terminal hoarding before the holiday and replenishment after the holiday has increased, at the same time, logistics has resumed after the holiday, and the improvement of market capacity has also boosted vehicle demand. The resulting short-term improvement still boosts the market atmosphere. According to market research, with the recent increase in diesel prices, automotive LNG has an obvious price advantage compared with automotive diesel, which is good for sales at gas stations. Heavy truck operators said that in the actual logistics operation, calculated according to the transport distance of 5000km, the fuel cost of LNG heavy truck may be reduced by about half compared with diesel heavy truck, and the economic advantage of fuel makes the phenomenon of large-scale gas vehicles replacing oil-head vehicles appear in some areas, and the continuous improvement of traffic gas demand in the past two months provides strong support for the upstream price increase.

Fourth, both international and domestic costs are rising to provide support for price increases.

As of May 17, 2024, the Dutch natural gas futures price (TTF) closed at US $9.81 per million British heat, up 18.62% from the beginning of April, while London natural gas futures price (NBP) closed at US $9.45 per million British heat, up 16.24% from the beginning of April. Meanwhile, according to data from the Shanghai Oil and Gas Trading Center, the spot CIF price of LNG in China was $10.519 / million British heat on May 17, up 20.16% from the beginning of April. At the same time, from a domestic point of view, according to Zhuochuang statistics, the average auction price of raw material gas in May was 2.575 yuan per square meter, equivalent to about 4314 yuan per ton, up 18.21% from April. The rising cost of domestic raw gas, coupled with the strong CIF price of China's spot LNG, also enhances the bottom support of the price.

Fifth, outlook: strong supply and weak demand, but cost support market downward trend or limited

On May 13, the average ex-factory price of LNG across the country was 4339.95 yuan / ton, down 1.07 yuan / ton from the previous working day, breaking the continuous rise in the off-season atmosphere for a month. Since then, the rise has been suspended, and prices have changed from rising to falling. As of May 20, the national average factory price has reached 4240.11 yuan / ton, down 100.91 yuan / ton from before the decline, and has fallen for six consecutive days. Fundamentally, as the previous price continues to rise, the comparative advantage with pipeline gas decreases, the terminal procurement enthusiasm weakens, the market trading vitality decreases, and the pre-maintenance liquid plant has gradually resumed production, under the background of strong supply and weak demand, the price has changed from rising to falling. Looking forward to the future, although the market supply and demand weak situation is difficult to change in a short time, terminal resistance to high prices may still make the market maintain a weak market, it is expected that domestic LNG prices may still have further downward space. However, the current ex-factory price is in line with the cost of raw gas in May, coupled with widespread concerns caused by the shutdown of a production line in Australia, international natural gas prices may remain high and the decline is expected to slow on the back of costs.