The widespread Coronavirus epidemic in China is set to negatively impact the LNG demand in China, this year. The slump in Chinese industrial production and the slowdown of the economy will impact the demand for LNG in China.
The Chinese Lunar New Year celebration was badly hit as people preferred to stay at home. Movie theatres, hotels, restaurants, cafes remained shut. There is also a slowdown in industrial output as major Chinese industrial belts extended the New Year holidays.
However, domestic gas demand will increase as more people will remain at home. But, there will be a sharp decline in commercial and industrial demand for natural gas. Major Chinese gas importers like CNOOC and Jovo Group are unclear about the actual impact of Coronavirus on gas demand.
Hubei province is the epicenter of this deadly Coronavirus epidemic. Trade analysts say if the economic slowdown in Hubei continues through February, Chinese gas demand can drop by 5%-7%.
Major Chinese LNG Importers To Forcibly End Contracts
Due to a major decline in LNG demand following the Coronavirus epidemic, Chinese LNG buyers will end major contracts. CNOOC has already informed global gas suppliers Shell and Total that they won’t take in LNG supply delivery.
Moreover, the Chinese government said it will offer necessary support to companies that are seeking to end international contracts. This decision of the Chinese LNG buyers will cause a sharp increase in the spot price of natural gas in other Asian markets.