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Asian spot LNG prices slightly up to around USD 16 per MMBTU

Steel News - Published on Mon, 09 Apr 2012

Asian LNG spot prices increased approximately by USD 1 to around USD 16 per MMBTU from about a month ago. At the end of February 2012, when procurement for winter months until around April 2012 was almost finished, spot prices declined to the high USD 14s per MMBTU. However, since early procurement has begun in preparation for demand season in summer, the spot prices have gradually turned upward in spite of non demand season.

To cope with active demand, Asian suppliers are increasingly trying to sell their redundant stocks on a spot basis. But the quantity is limited because most stocks are managed under long term contracts. Consequently, main buyers such as Japanese electric power utilities have no choice but to make purchases from Atlantic Basin suppliers, who expect to sell LNG at expensive prices. Accordingly, the market is currently favorable for sellers.

Under the present circumstances where the market prices are on the rise in May 2012 when procurements for summer demand have not yet started, there are some people who are concerned about that upward trend of the prices might continue to summer.

On the other hand, a person pointed out that impending shipment from Pluto LNG Project as well as restarting operations at Nuclear power plants in Japan, possibility of which are being explored despite obstacles, might cause the prices come down.

At present, main LNG buyers, Kansai Electric Power Company and Kyushu Electric Power Company will greatly change their procurement volumes, depending on operations at nuclear power plants. For this reason, unlike Tokyo Electric Power Company, these companies are unable to conclude the medium and short term contracts and covering most of their additional needs on spot basis. In short, if their nuclear power plants should come back on stream, Kansai and Kyushu Electric will extremely reduce their procurements on spot basis.

Kansai Electric\'s Oi nuclear power plant is most likely to be put back into operations among nuclear plants in Japan. However, the local governments have not accepted resuming operations. Therefore, it is unknown whether the nuclear power plant can restart in the future. But if the situation remains unchanged until summer, supply of electricity to Kansai district will be significantly tight and an order on electricity use restriction, which was issued to areas under control of Tohoku Electric Power Company and TEPCO last year, will be unavoidable.

The legal restriction on the use of electricity will be heavy drag on businesses in the areas. Moreover, if electricity should be restricted this year as it was done last year, criticism against the administration will inevitably grow. The government will be questioned what was going on for the past year. Therefore, it must avoid to restrict the use of electricity at any cost. For that purpose, the government will be expected to try more harder to persuade the local authorities into accepting to restart nuclear power plants.

In addition, LNG is ready for shipment at Pluto LNG Project, which is an another great factor to reduce market prices. The project will be the largest supply source for Kansai Electric. At the project, LNG can be produced at any moment. All Kansai Electric and Woodside Petroleum Limited have to do is just to decide time for shipment.

Although pace of shipments might be slow during the initial period, Kansai Electric will surely decrease its procurement on a spot basis when shipments begin at Pluto. On top of that, even if a single nuclear power plant should be placed back into service, extra premium for LNG prices on the market will be completely cut.

Source - TEX Report Limited


Posted By : admin on Mon, 09 Apr 2012
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