LNG Traders storm the market

The arrival of new commodities traders dealing in LNG has caused a shift in the LNG market.  Trading entities tend to be more responsive when it comes to meeting changing buyer demands.  So what role will this play in the development of LNG hubs in Asia?  In a Q&A session with Chong Zhi Xin, Principal Analyst for Asia Gas and Power at Wood Mackenzie, we discussed the arrival of new commodities traders dealing in LNG and the effect this will have on the LNG market.

Will traders have an increasing role to play in Asia, even when the current LNG supply surplus is used up?

Chong Zhi Xin: Traders will definitely play a larger role in Asia due to the growth of LNG supply over the next few years. Suppliers are seeking new markets and Traders have a good understanding of emerging players through their dealings of other commodities such as coal, crude oil and other oil products. Longer-term, traders are keen to develop a more sustainable business and have sought to secure long-term contracts for both supply and demand.

What impact will traders have on contracting trends in Asia?

Chong Zhi Xin: Traditional Asian buyers who have always relied on long-term contracts have begun to see the benefits of short-term and spot supply. Traders provide more liquidity to the market and this gives buyers more comfort in using short-term markets to meet their needs. Consequently, growing activity by traders have contributed to lower LNG prices and provides buyers with another option to meet import needs. The entry of traders has led to the increase of physical trading and this will accelerate the development of LNG hubs in Asia.

What are traders offering that differs from traditional suppliers?

Chong Zhi Xin: Traders offer more flexibility to meet buyer requirements. As they are not tied down with long-term projects, they are more flexible in credit terms and delivery schedules. This flexibility is immensely important for companies that have an uncertain view of demand. For instance, buyers in India has been reticent to sign long-term contracts owning to the uncertainty of affordability once LNG prices increase. For this reason, traders have had more success in meeting market needs owning to their ability to source for cargoes and ships on a spot basis and take on the market risk of these new buyers.

Read more on traders and their moves in the LNG sector in Wood Mackenzie’s insight: LNG Commodity Traders.

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Wednesday, April 5th from 9:45am to 1:00pm – Key industry leaders including Jack A. Fusco, President & Chief Executive at Cheniere Energy, will be discussing contracting, pricing and trading of gas and LNG at Gastech 2017 in Chiba – Tokyo. View the Gastech conference programme.

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