Latest JKM statistics available

Stephanie Wilson explains what the latest JKM means for Australian LNG

Stephanie Wilson explains what the latest JKM means for Australian LNG

The latest statistics from Platts put the spot price of LNG in Japan and Korea for December at 41.7 per cent down on this time last year.

However, the Japan/Korea Marker (JKM) has increased by 8.7 per cent from $6.7/MMBtu to an average of $7.280/MMBtu for December. The price began at $6.80/MMBtu at the start of the assessment period on 16 October and ended at $7.65/MMBtu on 13 November.

Max Gostelow, Platts pricing analyst of Asia LNG said “Most buyers were heard to be grappling with high inventories following lower-than-predicted power demand. But demand from traders with short positions, and strong demand from buyers in India, Pakistan and the Middle East, combined with a lack of available cargoes, resulted in upward price pressure on the spot market.”

The drop on last year’s value is still better than the JKM for November, which was down by 53.5 per cent when compared to 2014. Talking to Gas Today, Stephanie Wilson, managing editor at Platts, explained “The LNG spot price has been declining all year as the market starts to rebalance following the impact of the Fukushima disaster which resulted in extremely high prices. The advent of new supply from PNG and Australia in the earlier part of the year put downward pressure on
prices, as did the relatively mild weather we’ve seen throughout northeast Asia the last few summers/winters. So in that sense, the year on year drop is not so surprising.”

The latest Platt figures state that the price of possible competing fuels such as thermal coal and fuel oil were also down. Thermal coal was lower by 3.2 per cent on a month-on-month basis, while fuel oil was down by 0.8 per cent month over month during the 16 October to 13 November assessment period.

But this brings mixed news for LNG exporters as Ms Wilson clarified “In some markets, competing fuels are actually taking more market share as prices of coal and crude oil are favourable vs more expensive term LNG.

“Where environmental policy drives purchasing decisions (for example; China) we can probably expect to see the share of gas in the market increase, but more price sensitive countries (India, SE Asia, etc) are still heavily reliant on coal. LNG must remain economically competitive if it wants to retain its share of the market.”

As for the outlook, Ms Wilson warns that more volumes are coming to the spot market. She says “Between now and the middle of 2016, some 27 million mt is anticipated to hit the market from projects in Australia and the US.
“A lot of this supply will be flexible given the nature of US contracts and the over commitment of certain buyers/traders. So far, we’ve seen the JKM more or less range-bound between $7-8/MMBtu this year, new volumes might push that figure lower.”

“After a year of slow gas demand, China has just reduced its domestic prices by 30 per cent - that’s good news for demand, but it will largely be demand for cheap cargoes as a result of that policy. Australia may be able to place more cargoes as a result of this, but they’ll do so at a lower price.”

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