Buyer’s market weighs on gas exporters from Qatar to Iran

Bolivia’s President Morales speaks during a news conference at the venue where the GECF Summit will be held in Santa Cruz. (Reuters)
Updated 22 November 2017
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Buyer’s market weighs on gas exporters from Qatar to Iran

SANTA CRUZ, Bolivia: Top officials of major gas producing countries gathering this week in Bolivia will face a harsh reality: Expanding supplies of the fuel are giving global buyers greater sway over purchase and contract terms.
This week’s Gas Exporting Countries Forum (GECF), which aspires to be the OPEC for natural gas suppliers, is expected to draw energy ministers from Qatar, Iran, Russia and Venezuela to Santa Cruz, Bolivia as market oversupply reduces revenues.
These countries increasingly are competing with exports from and prices set in the US, which is on track to become the world’s third largest exporter of liquefied natural gas (LNG) after Qatar and Australia.
That has “buyers in a better position to make contracts with shorter terms and more customized to their demand profile, without risking money in high take-or-pay clauses,” said Mauro Chavez, a senior research analyst at consultants Wood Mackenzie.
At least 25 countries are now capable of receiving LNG supplies and new regasification plants are expected to start operating in the coming months, giving buyers greater flexibility and increasing competition for suppliers.
Even though LNG represents only about 10 percent of the world’s gas trade, new suppliers are willing to offer sweeter terms to customers, roiling traditional markets and turning up the heat on some producers trying to hold onto more rigid terms.
The US has been the most aggressive in shaking up the market, through flexible contract terms.
US suppliers such as Cheniere Energy, the largest country’s LNG exporter, are allowing customers to resell cargoes, which has created a profitable market for trading houses. A growing number of spot LNG sales and swaps is also taking place. Cheniere plans to open its fifth liquefaction plant in the coming months while seeking new buyers.
The rise of the US as a force in global LNG markets and its growing gas sales to Mexico via pipeline have contributed to greater price certainty, according to analysts. This is reflected in a long and flat North American dry gas cost curve that should limit abrupt price increases, they added.
Price indexes are becoming a factor not only in LNG contracts but also in sales via pipeline.
Pricing at the US Henry Hub fell in the last decade from a peak of around $11 per million British Thermal Units (BTUs) at the end of 2005 to a low of $1.96 in March 2016. Since then, prices have remained stable around $3 per million BTUs.
Attendees at the gas forum might work on “a methodology for determining gas prices in contracts,” which would promote more stability, Bolivian Hydrocarbons Minister Luis Sanchez said earlier this month.
In markets such as the Caribbean, some sellers also are customizing their gas supplies by linking contracts to fuel oil prices, which is also used for power generation.
“I don’t see a situation where the price of LNG would be very high. The price of LNG will be very competitive in the mid-term and in the long run,” said Edgar Almeida, professor of the Instituto de Economia UFRJ in Brazil, flagging other market entrants such as Mozambique.
The gas glut has fueled some mergers among producers, just as the terms of some of the world’s most important gas trade deals are being renegotiated ahead of their expiration dates, including some contracts between Qatar and Japan, South Korea and Taiwan.
Other traditional gas suppliers such as Russia, Norway and Algeria seem determined to maintain market share in key markets such as Europe.
In Latin America and the Caribbean, where US LNG supplies have lowered prices for importers such as Chile and Argentina, traditional suppliers Trinidad and Bolivia need to attract upstream investments, cut costs and offer consumers more pricing flexibility to remain competitive.
— REUTERS


China sorghum imports jump after Beijing dropped probe into US shipments: Customs

Updated 23 July 2018
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China sorghum imports jump after Beijing dropped probe into US shipments: Customs

  • China brought in 450,000 tons of sorghum in June, up from last year’s 324,301 tons
  • Corn buyers, meanwhile, scooped up cargoes on worries over the return of US-China trade policy tit-for-tat amid high domestic prices

BEIJING: China’s sorghum imports in June surged 38.1 percent on year, boosted by a temporary easing of Sino-US trade tensions, while corn imports for the month rose to one of highest levels in the past decade, customs data showed on Monday.
China brought in 450,000 tons of sorghum in June, up from last year’s 324,301 tons. Volumes were still down slightly from 470,000 tons in May, data from the General Administration of Customs showed.
Beijing announced in mid-April that importers of sorghum from the United States would have to put up a 178.6 percent deposit on the value of shipments. Several cargoes already on the way changed course and were diverted to other markets.
A month later in a goodwill measure, however, China dropped the deposit and an anti-dumping probe into US sorghum imports as the two sides appeared to be reaching consensus on resolving trade issues.
“Some cargoes were already on the way to China when Beijing dropped the deposit. Then they cleared customs in weeks after. That should have pushed up the June volumes,” said Cherry Zhang, an analyst with Shanghai JC Intelligent Co. Ltd, before the data release.
Corn buyers, meanwhile, scooped up cargoes on worries over the return of US-China trade policy tit-for-tat amid high domestic prices.
Corn imports in June hit 520,000 tons, up 34.6 percent from a year ago and the second highest since July last year. The figures were down from 760,000 tons in May, the data showed.
The corn imports in the first six months tripled to 2.21 million tons, already close to China’s total 2017 purchase of 2.82 million tons of the grain, according to the data.
“There were margins importing corn as domestic corn prices were relatively high. And buyers were buying more corn in recent couple of months to prepare for the Sino-US trade tension in advance,” said Meng Jinhui, an analyst with Shengda Futures.
UScorn and sorghum shipments to China should drop significantly in July and August, analysts and traders said, as Beijing imposed a 25 percent tariff on US grains on July 6.
China buys almost all its sorghum imports from the United States.
In the first half of this year, China has brought in 3.25 million tons of sorghum, up 8.7 percent from the same period of 2017, the data showed.
China also brought in 590,000 tons of barley in June, down 5.6 percent from a year ago. Barley imports for the first half of the year were at 4.4 million tons, down 2.7 percent.
Wheat imports were at 310,000 tons in June, down 33.6 percent from a year ago. Wheat imports for the first half were at 1.95 million tons, down 26.4 percent, the data showed.
China bought 280,000 tons of sugar and 98,566 tons of pork in June. In the first half of the year, China’s sugar imports were at 1.38 million tons, and shipments of pork were at 647,985 tons, both down from last year’s levels.