China’s demand for natural gas is set to slow down as a result of a weakening economy and the rise of cheaper energy alternatives. In recent years, natural gas consumption, promoted as a key step towards net-zero emissions, has seen double-digit growth. However, this growth is expected to decelerate due to weaker industrial demand and a surplus of coal and renewable energy sources, which are limiting the need for gas.
Government policies are contributing to this trend. Beijing’s transition plan from coal to gas has lost momentum, and some provinces have begun reducing electricity prices to support struggling factories. Meanwhile, the country is focusing on boosting domestic gas production and increasing pipeline imports from Russia. This shift is particularly harmful to the liquefied natural gas (LNG) market, which relies on seaborne tankers to deliver more expensive fuel to China’s coastal terminals.
In 2024, gas imports rose by nearly 10%, reaching over 130 million tons. However, this growth masks a recent decline in LNG demand, which represents nearly 60% of China’s total gas imports, coming from countries like Australia and the US. China International Capital Corp. forecasts that overall gas demand growth, including domestic production and imports, will drop to 6.2% in 2025, down from 9.4% in 2024. Similarly, the consultancy Gastank anticipates a decrease to 6%.
Guangdong, a major economic hub, illustrates this trend. The province has aggressively increased its gas consumption in recent years, but now it is cutting power bills to support its export-driven industries. Gastank estimates that power costs in Guangdong may need to fall to around $7 per million British thermal units, about half the current price of LNG. Additionally, the province is pushing for market-based electricity trading, giving consumers more flexibility in choosing power sources. As a result, factories are less likely to ramp up production and fuel use during economic uncertainty, and they will seek the most affordable options available.
Gas imports, particularly LNG, face tough competition from domestically produced gas, including coal bed methane, as well as China’s massive surplus of coal, solar, wind, and nuclear energy. These alternatives are expanding rapidly and reducing the country’s dependence on natural gas.
In other news, China’s oil demand and growth outlook are under pressure due to persistent deflation and declining credit impulses, according to Bloomberg Intelligence. Despite these challenges, the country set a record for exports in 2024, contributing to a trade surplus nearing $1 trillion. However, the global trade imbalance continues, fueled by government protectionism and efforts by businesses to diversify suppliers.
The Lunar New Year, typically a quiet period for car dealerships in China, may see a different trend this year, with a potentially busier season.
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