SINGAPORE- China appears to be slowly recovering its appetite for natural gas after being hit by a coronavirus outbreak, with imports of liquefied natural gas (LNG) rising last week for the first time in five.
Apart from the central province of Hubei, the epicentre of the outbreak that has killed more than 2,600 people, new infections elsewhere in China appear to be slowing. On Monday, four provinces eased back on emergency measures.
“Plants are resuming gradually as the virus is (expected) to be curbed anyway,” a source familiar with LNG imports into China told Reuters.
LNG volumes shipped into the world’s second largest importer of the super-chilled fuel rose to about 1.4 million tons last week, up from 0.5 million tons the previous week, shiptracking data from Refinitiv and Kpler showed.
It was the first weekly rise since mid-January, according to Kpler.
This week, LNG shipments to China are expected to rise even further, by about 15 percent, to about 1.6 million tons, the highest weekly volumes since early January, shiptracking data from Refinitiv showed.
“(Domestic) gas demand is still weak but it’s definitely better than two weeks ago,” a second source based in Beijing said.
Urged to restore economic activity by President Xi Jinping, large parts of China relaxed curbs on transport and movement of people on Monday, as new reported cases of the virus outside the worst-hit province fell to the lowest in a month.
LNG is typically regasified into gas which is usually consumed mainly in the industrial, chemical, commercial and power sectors.
China’s state planner has for the first time urged natural gas suppliers and distributors to implement off-season prices earlier for industrial and commercial users, to help mitigate losses from the virus outbreak.
The number of vessels temporarily storing LNG has also fallen to 15 by Tuesday, from 23 on Friday, said Kpler analyst Rebecca Chia, adding that most of them discharged the cargoes at Chinese ports.
“The total number of floating storages … peaked last Thursday … and were mainly concentrated in the China Sea, and the floating storage situation has eased over the weekend as discharges into Chinese (ports) rebounded back significantly,” she added.
Meanwhile, banks are suspending the credit lines for some Chinese independent oil refineries amid rising concerns about overall industrial defaults and as the coronavirus outbreak has eaten into the processors’ fuel sales.
At least three independent refiners have had $600 million in credit lines suspended by international banks, said three refinery and trading executives and two finance directors at the affected companies, requesting anonymity because of the sensitivity of the matter.
DBS Group Holdings in Singapore, France’s Natixis and BNP Paribas, and Dutch bank ING have suspended open account credit facilities for the companies based in Shandong province, home to the majority of the independent plants that buy about 20 percent of China’s oil imports, the sources said.
The refinery sources said the suspensions are for open accounts, typically revolving credit lines that are issued before any oil is shipped and delivered, and also “back-to-back” accounts, credits that are guaranteed by a letter of credit from a Chinese bank.
“All our applications for new open-account credits are frozen … these clean credits are pivotal as we buy 6 to 8 million barrels of oil each month,” said one of the sources, a trading executive at a Shandong-based refinery. – Reuters
