(Bloomberg) -- As the coronavirus pandemic roils the global liquefied natural gas market, suppliers are finding that the center of demand has come full circle back to where it was first hit: China.
Over the past two weeks, Chinese buyers have become some of the most active in the Asian market. That signals a turnaround from February, when the country's top importers sought to delay or cancel shipments due to demand and logistical constraints caused by the Covid-19 outbreak.
Meanwhile, stalwart buyers in South Asia and Europe have taken a step back as governments kick off strict lockdowns. Indian importers, who helped soak up a global LNG glut by snapping up cheap cargoes, had to declare force majeure on prompt shipments due to the pandemic. The clause allows companies to remove liability for natural and unforeseeable events.
The reversal illustrates how the fast-spreading coronavirus can shut down economies and disrupt trade flows at the drop of a hat. China's gas consumption is recovering, aided by a March rebound in manufacturing activity as factories ramp up operations after weeks of work suspensions.
“Demand has also been driven by smaller players with storage capacity, who are emerging to take advantage of low spot prices,” said Edmund Siau, a Singapore-based analyst at energy consultant FGE.
China imported about 1.26 million tons of LNG in the week of March 23, the first time it's risen above the 2019 weekly average in more than a month, according to vessel-tracking data from Kpler.
Small Buyers
The buying increase is mainly from smaller utilities, which are trying to take advantage of cheap prices while their bigger counterparts struggle to consume all their contracted supply, said BloombergNEF analyst Lujia Cao.
Deals in March include the purchase of several cargoes by ENN Energy Holdings Ltd. and Guangdong Yudean Natural Gas Co. for delivery throughout 2020. Shandong Zhongnuo closed its first-ever tender seeking three shipments for May to October delivery, while Yudean had a separate tender for a May to June shipment.
State-owned China National Offshore Oil Corp., the country's biggest LNG importer, has been largely absent from the market as it grapples with bloated inventories. CNOOC in February invoked force majeure on prompt LNG deliveries to Chinese ports.
Sinopec Group, which has room available in its storage tanks for spot cargoes, is in the market seeking cargoes for April and May delivery, according to traders with knowledge of the matter.
There's uncertainty over how sustainable China's demand revival will be and whether it's enough to arrest a slide in spot prices as the economy faces a growing threat from slumping external demand. The Asian benchmark LNG Japan/Korea Marker fell this week to a record amid the worsening coronavirus impact on other parts of the world.
©2020 Bloomberg L.P.
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