Beijing May 18 2022: China has ramped up coal production to offset declines in imports of coal and LNG amid surging global energy prices, and analysts expect natural gas consumption to contract further in 2022 while coal consumption continues to rise.
The trend is in line with natural gas demand destruction in several industries that have a high share of gas usage, such as ceramics that requires high-temperature gas furnaces, and a wider switch toward cheaper fuels, like coal and oil, in the region to keep the lights on.
China’s total natural gas supply, comprising domestic production and imports of pipeline gas and LNG, fell 6.6% year on year to 28.85 billion cubic meters in April, according to official data.
Out of this total supply, imports showed a much sharper decline. China’s natural gas imports, including piped gas and LNG, peaked in December 2021 at 16.07 Bcm, and dropped 30% to 11.15 Bcm in April, according to customs data.
LNG imports saw the steepest decline, with March imports down 18% year on year at 4.63 million mt, the lowest since April 2020, and April LNG imports were also trending near the lowest monthly level since early 2020, according to customs and shipping data.
Meanwhile, China’s domestic coal production hit a high of 395.79 million mt in March, before slipping to around 362.80 million mt in April, official data showed. The April decline was likely due to some small-sized coal mines lowering production because of tighter supervision on safety, according to market sources, but the average monthly production is trending 12% higher year on year.
China imported 75.41 million mt of coal in the first four months of 2022, accounting for only about 5% of its total supply of around 1,523 million mt over the same period, data from the National Bureau of Statistics showed. In comparison, imports accounted for nearly 50% of total gas supply for China.
“Chinese gas demand will grow by around 2% this year, and we have revised this lower from previous forecasts due to the weak demand seen so far this year amid the high prices along with the continuation of lockdowns,” S&P Global Commodity Insights analysts said. “The average annual growth rate of gas demand in China has been around 10% for the last three years.”
