The domestic LNG market trended upward with increased regional divergence this week. The price increase was driven by phased supply tightening and rising feed gas bidding costs, while off-season demand failed to improve correspondingly. In addition, previously maintained LNG plants resumed production and brought incremental supply to the market. The market presented a structural divergence where prices rose in regions with tight supply and weakened in regions with loose supply and demand fundamentals. It was a typical volatile market dominated by cost and supply drivers without solid demand verification.
I. Upward Drivers: Tightened Supply and Rising Feed Gas Costs Lift Plant Quotations
Phased supply contraction boosts market sentiment. Some LNG plants in certain regions remained under maintenance and reduced operating loads during the week, tightening circulating spot supply in local markets. Upstream inventory pressure eased and manufacturers showed a stronger willingness to support prices, creating favorable conditions for quotation hikes.
Higher feed gas bidding prices form rigid cost support. Rising transaction prices in feed gas auctions have directly increased production costs for inland LNG plants. The upward shift in cost levels lifted the bottom line of plant quotations. Driven by cost increases, some plants raised their ex-factory prices, pushing the national average LNG price higher in volatile movements and lifting overall bullish market sentiment.
Key Note: The current price increase was not driven by improved terminal demand. It was purely a quotation rise caused by supply contraction and higher costs, rather than a fundamental reversal of the overall supply and demand balance.
II. Fundamental Contradictions: Sluggish Off-season Demand and Resumed Production Trigger Regional Divergence
1. Persistent off-season demand weakness with no substantial recovery
The market is currently in the traditional summer off-season for natural gas with no heating demand to support consumption. Industrial users prefer piped gas with better cost performance and show low acceptance of high-priced LNG. Vehicle LNG consumption also saw no obvious improvement. Downstream buyers only maintain rigid demand purchases and are reluctant to chase price increases. High-priced LNG cargoes face strong trading resistance, and large-scale restocking activities are absent, constraining sustained upward price momentum from the demand side.
2. Resumed operation of LNG plants releases incremental supply
LNG plants that completed maintenance have resumed production one after another, bringing a marginal increase in domestic LNG supply. Although overall national supply is recovering, the supply release pace varies significantly across regions. Prices continue to rise in regions where plant maintenance is ongoing and supply remains tight. By contrast, regions with concentrated production resumptions see abundant supply, looser local supply-demand balance, mounting shipment pressure and declining prices.
This forms the most prominent market feature of the week: the national average price moves upward in volatility, while obvious regional divergence emerges, with price increases in tight-supply regions and declines in loose-supply regions.
III. Game Logic Between Domestic and Imported LNG Markets
Obvious divergence has appeared among domestic LNG plants. In regions with ongoing maintenance and gas source regulation, quotations are well supported by higher costs and tight local supply. In regions with concentrated production resumptions and sufficient gas resources, prices are under shipment pressure and weaken continuously due to sluggish off-season demand.
Import terminals are also affected by domestic supply changes. Localized price increases of domestic LNG improve the price competitiveness of imported seaborne LNG. However, low-price domestic resources from supply-increment regions impact truckload sales at surrounding receiving terminals. The persistent competition between domestic and imported gas further widens regional price differentials.
IV. Summary of Core Market Contradictions
Bullish factors: Phased local supply tightening and cost support from rising feed gas bidding prices drive some LNG plants to raise quotations and lift the overall market average price.
Bearish factors: The market remains in the consumption off-season with no substantial improvement in terminal demand. Concentrated resumption of maintained plants releases incremental supply, pressing down prices in regions with loose supply and demand.
Essentially, the market operates under the game between partial cost and supply positives and the overall off-season weak fundamental backdrop. Higher costs can lift market quotations but cannot reverse the weak demand pattern. Local supply tightness can drive temporary price increases, yet the upward momentum fades once supply recovers, making a sustained unilateral rally unlikely.
V. Short-term Market Outlook
Upside potential: Primarily dependent on subsequent feed gas price trends and plant maintenance and resumption progress. Sustained high feed gas prices will form solid cost support. However, without terminal demand recovery, substantial and continuous price increases are difficult to achieve, and the market is likely to see a pattern of increased quotations with insufficient transaction follow-up.
Downside constraints: LNG plant production costs form a firm price bottom, limiting sharp declines. Nevertheless, incremental supply from resumed production will continue to suppress prices in loose-supply regions.
Persistent regional divergence: As maintenance and resumption progress varies across regions, price differentials between provinces and between domestic and imported LNG will persist.
Key monitoring indicators: LNG plant resumption progress, feed gas bidding fluctuations, marginal improvements in industrial and vehicle gas demand, as well as cargo arrival and shipment strategies at receiving terminals. Competition between domestic and imported gas will continue to affect spot market performance.