LNG market to fall further

In 2024, spot prices on a DES Northeast Asia basis were at an average of $11.63/mmBtu from January to November, down $2.26 from the corresponding period last year. As the Northern Hemisphere experienced mild winter from the end of 2023 to early 2024, stocks were not digested that much in consuming countries. Therefore, European countries could easily build stocks from early spring. As a result, Europe and Asia did not compete to buy spot cargoes even in the scorching heat in summer. The DES Japan market hit the highest level at $15.35 on Nov 20, which, however, was as much as 35% below the highest price at $23.65 in January 2023. The price gap between the TTF (Title Transfer Facility) in the Netherland and the DES Japan market was hovering almost in the range of $8.00-15.00. LNG prices are affected by the TTF in recent years.

The LNG market would likely drop further in 2025. The TTF future market showed the highest price at around $15.01 for the January contract and was in backwardation toward the December contract as of Dec 3, 2024. The LNG market usually has two high-demand seasons in winter and summer, when power demand is high. Therefore, the market often rises from spring to summer and from autumn to winter. But the situation would likely be different in 2025.

There are some reasons for the downward forecasts. One of the reasons is an expected tight supply at the beginning of the year. Contracts for Russian natural gas supplied through Ukraine expired in December 2024. Ukraine does not want to extend the contracts and supply to Europe is predicted to decrease in January onwards. Under such circumstances, buying is active for the January contracts of the TTF in the wake of supply concerns and prices are high for prompt timing. As a result, the market is in backwardation, according to Asian brokers.

Meanwhile, many other players pointed out that as new LNG production projects would start up, supply would increase in the world and prices would decline. A series of new projects would start up in the US from 2025 and supply/demand is anticipated to loosen. Although constructions of new projects have been delayed due to the pandemic and a rise in labor and construction costs since 2020, the 13.30 mil mt/year Plaquemines project in the US started up at the end of 2024 and the 14.00 mil mt/year LNG Canada project is going to start shipments in summer 2025.

On the other hand, demand from Southeast Asia and South Asia is expected to grow. However, major importers China and Europe have a big impact on the market. A Chinese end-user said, "The market situation really depends on the weather in winter." The market would depend on how long cold waves would continue in the Northern Hemisphere from the end of 2024 to early 2025. Even so, a Japanese trader said, "China is building new receiving tanks and enhance storage capacity, so it is unlikely that supply/demand would extremely become tight." While spot prices are forecast to stay around $15.50 on a DES Northeast Asia basis from January to Mach 2025, some market players mentioned, "Prices should be lower than the forecasts to match actual supply/demand situation."