The Chinese New Year is underway and the festivities mark a slowdown in trade and disruptions to global supply chains until at least February 4.
Singapore is also closed today and tomorrow for the Lunar New Year. The impact on factories, production and logistics are felt “for weeks before and after” according to KG Logistics. “The result is congested ports, reduced freight capacity, and delays in shipping schedules that ripple across global trade,” it states.
When the post-holiday recovery begins, delays can occur clearing the backlog.
Some Chinese state-owned and second-tier oil and gas companies have been looking to sell LNG cargoes for January-February period to alleviate pressure from growing inventory and weak domestic demand, according to S&P Global.
The selling interest reflects expectations that regional heating demand is unlikely to surge as winter progresses, which would help lower spot Asian LNG prices, despite some demand for spot cargoes from Europe that would typically trigger price competition and tighten supply.
Recent cold weather was too short to stimulate additional demand and mild weather has also suppressed demand in other north-east Asian regions.
China is the world’s largest LNG importer and traders are struggling to sell surplus gas in the domestic market due to falling demand, which is also likely to prompt a delayed recovery after the holidays.
Another key factor this year is the prospect of US tariffs. US President Donald Trump is considering imposing a 10% tariff on imports of Chinese-made goods as soon as 1st February, though it could be as high as 60%-100% in some sectors. Any actions would likely prompt a retaliatory response.
The largest adverse effect of Donald Trump’s trade policies would be to China’s economy, with a projected loss of 0.68% of GDP, according to a London School of Economics and Political Science report.
Dr Aurélien Saussay, Assistant Professor at the Grantham Research Institute on Climate Change and the Environment, said, “Retaliatory measures by China or the EU would likely worsen economic outcomes for all parties involved, potentially sparking a damaging trade war.”
LNG, coal and renewables: a diverse mix
QatarEnergy and Shell have entered into a new long-term sale and purchase agreement (SPA) for the supply of three million tonnes per annum (mtpa) of LNG to China. Deliveries started this month.
Read more: QatarEnergy and Shell to supply 3Mtpa LNG to China
Last September, TotalEnergies announced a five-year extension of its sales and purchase agreement (SPA) with CNOOC, for the delivery of 1.25 million tonnes of LNG per year to China until 2034.
However despite such moves, LNG is ‘not replacing coal in China’s power mix’, according to the Institute for Energy Economics and Financial Analysis (IEEFA), noting that coal-generated power is $30-40 per Mwh cheaper than natural gas.
“LNG is expected to play a minimal role in supporting the clean energy transition in the country’s largest coal-consuming sectors,” it states.
China is also in the driving seat when it comes to renewables development. Cleantech firm Topsoe recently announced it is providing essential technology needed to produce sustainable aviation fuels (SAF) and renewable diesel.
Read more: Topsoe to supply tech for China clean fuel project
