China offloads record LNG as Hormuz disruption lifts Asian prices

Chinese companies are offloading record quantities of liquefied natural gas onto the spot market as domestic demand weakens and supply disruptions push Asian prices sharply higher.

At least eight to 10 cargoes are set to be reloaded in March, bringing year-to-date resales to 1.31 million tonnes across 19 cargoes, according to trade sources and analytics firm Coalinfo.

Asian LNG prices have risen 85 cents per million British thermal units since 28 February as the Strait of Hormuz remains disrupted.

Record reloads as spot prices encourage resales

Asian LNG prices have climbed 8.5% since the US and Israel launched military strikes on Iran on 1 August and 28 February, respectively.

The threat to the Strait of Hormuz, through which about 20% of global LNG trade flows, combined with stronger Asian prices following the end of the heating season, has prompted Chinese buyers to sell remaining contracted supplies on the spot market rather than purchase new cargoes.

"Due to weak domestic demand, buyers have been looking to sell contracted volumes on the spot market, with spot prices strong enough to encourage China to reload," market sources told ICIS.

Imports slump to lowest since 2018

China's LNG imports fell in March to their lowest level in more than a year, dropping to 3.68 million tonnes — the weakest reading since April 2018 — according to data from trade analytics firm Kpler.

Industrial gas demand remains soft due to high prices since the Hormuz disruptions. Pipeline gas imports and domestic gas production outlook remain stable.

Chinese buyers have also been drawing on existing domestic inventory to meet a portion of local demand, according to Xiong Jian, general manager of business development at Chemlink.

ICIS expects April import volumes to ease further, falling to 3.7 million tonnes from 4.1 million tonnes in March. Chinese buyers are unlikely to compete aggressively for spot cargoes in the near term.

Suppliers, terminals and the broader backdrop

China was Qatar's largest LNG customer last year, taking roughly 23% of Qatari exports — though volumes fell after Iran struck Qatari gas production facilities and effectively closed the Strait of Hormuz shipping lane.

With weaker industrial demand and a sharp rise in both domestic output and pipeline supplies, China has shifted from buyer to seller, exporting surplus volumes to regional neighbours.

The country's stance on energy product trade has also evolved: a month after banning exports of refined fuel to address a crude oil shortage, it is now looking to new facilities to supply domestic demand for diesel, petrol, and other products.

What to watch?

The pace at which Chinese resales continue will depend on industrial demand, pipeline inventory levels, and how long Hormuz-related disruptions continue to support elevated Asian prices.

With spot prices high and domestic demand subdued, China is likely to remain a net reseller in the near term.

Drawing on domestic and pipeline supplies, China is emerging as a significant regional supplier as other Asian buyers seek alternatives, even as north-west European gas prices decline and the broader market reconfigures around the ongoing disruption.