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Asia’s LNG demand continues to slide
Asia’s demand for liquefied natural gas (LNG) continued to fall in the first quarter of 2023 compared to last year, despite lower global prices and ongoing gas demand destruction in Europe.
Declining LNG imports in the key Asian markets of Japan, China, and South Asia outweighed increasing demand in South Korea, Taiwan, Thailand, and Singapore, according to data from IHS Markit and Bloomberg New Energy Finance (BNEF).
The results represent the sixth consecutive quarter of year-on-year (y/y) declines in Asian LNG imports, a trend which began even before the Russian invasion of Ukraine rocked global LNG markets.
The invasion caused Europe to increase LNG imports by 60% last year, pulling cargoes away from Asia and causing spot market prices to spike. As a result, Asia’s annual LNG demand fell by 7% in 2022.
A record warm winter, along with healthy storage levels and gas demand destruction in Europe, has brought global LNG prices down since the start of the year. Even so, European LNG imports increased 6.6% y/y in the first quarter and global prices remain well above historical averages.
Meanwhile, LNG demand in the two largest markets, Japan and China, has fallen even from lower baseline levels in 2022. LNG demand in key Asian markets remained tepid in 1Q 2023.
China’s LNG demand fell by 2% y/y in the first quarter of 2023 and 14% compared to the first quarter of 2021. Many expect Chinese LNG demand to recover sharply this year after Chinese buyers reduced purchases by 20% in 2022 due to high prices and a COVID-19-related economic slowdown.
However, a surge in China’s domestic production and increasing imports of pipeline gas from Russia will likely squeeze the need for LNG — a more expensive, flexible gas supply source. In 2022, pipeline imports and domestic gas production were up 9% and 6%, respectively, as LNG imports plummeted. This year, China has re-exported record high volumes of LNG to other countries, indicating weak domestic demand.
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