Asia LNG prices hit four-year high

Asian buyers are paying the highest prices for liquefied natural gas in nearly four years as they secure supplies for the heating season. The Platts Japan Korea Marker, the primary benchmark for LNG delivered to Northeast Asia, crossed the $30 per million British thermal units threshold on Oct. 19. This marked the first time the price had reached that level since December 2022.

S&P Global Commodity Insights recorded the December delivery price at $30.761 on Oct. 22. That figure represented an increase from $30.432 on Oct. 19. The previous high for this benchmark stood at $32.171, recorded on Dec. 21, 2022.

Eric Yep, a senior principal analyst at S&P Global Energy CERA, identified three main factors driving the price increase. These include uncertainty surrounding the war in the Middle East, the European Union's upcoming ban on Russian LNG imports, and weather patterns linked to El Niño. Yep stated that winter restocking by state-backed importers in North Asia has been a key reason for pushing prices to the $30 level.

Specific purchasing activity reflects this urgency. Market sources cited by S&P reported that a South Korean importer secured at least five to six cargoes for delivery in December and January. Participants in the market also expect Taiwan to seek additional cargoes soon due to its exposure to supply disruptions in the Middle East. In contrast, buyers in September had largely waited, anticipating a mild winter and more cargoes passing through the Strait of Hormuz would soften prices.

A Singapore-based trader told S&P that market participants were not pricing in winter fears earlier and are now panicking. However, not all analysts expect the climb to continue. One Asian market source noted that gas priced at $30 invites demand destruction, particularly in China and South Asia, where buyers may cut imports or switch to other fuels.

Taiwan's import data illustrates how the war has shifted supply sources. The United States supplied 24.5% of Taiwan's natural gas imports from January through August, amounting to about 3.87 million tons. This share compares to 9.9% for all of last year. Qatar, previously the top supplier, fell to third place with a 10.7% share, down from 33.7%. Australia remained the leading supplier at 34.8%.

The Liberty Times attributed the U.S. gain mainly to a 25-year contract between Taiwan's state-owned CPC Corp. and Cheniere. Deliveries under this contract began in June at a rate of 1.2 million tons per year. The U.S. share is already close to the government's target of 25% for 2029.

Alaska enters this story through planned but future contracts. Taiwan's economy ministry confirmed plans for CPC to buy 6 million tons a year from Alaska LNG, with investments of up to $4.4 billion. Gasworld reported that these terms remain subject to further negotiations, studies, and budget approvals. If the project stays on schedule, deliveries could begin as early as 2032.

South Korea's commitment is currently less defined. A joint U.S.-Korea statement said the two countries have agreed to commence working on the Alaska LNG project, subject to meeting commercial reasonableness. The United States gave a nonbinding assurance of priority access to the gas. In its Oct. 1 report to the U.S. Department of Energy, Alaska LNG Project LLC stated it has not yet entered into any long-term contracts associated with the long-term export of LNG. Testimony to the Alaska House Resources Committee in March projected that exports would begin in early to mid-2031.