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Tokyo Electric imports record LNG volume

Utility buying fits market expectation; prices not high enough to spur Atlantic diversions

Tokyo Electric (Tepco) imported a record volume of LNG last month, with the utility stocking up ahead of summer’s peak electricity demand. But spot prices offered by Asian buyers are, as yet, insufficient to tempt Atlantic basin cargoes, said market participants.

Japan will need additional LNG imports this year after March’s magnitude-9 earthquake and tsunami triggered nuclear plant shutdowns, forcing utilities to restart idle thermal power plants to offset the lost generating capacity.

Tepco, operator of the stricken Fukushima-Daiichi nuclear station, imported 2.138m tonnes of LNG in March according to its latest import data – 27% more than in February and up by 9.9% on March last year.

The year-on-year increase roughly fits with market predictions of Japan requiring an additional 6m-10m tonnes a year (t/y) of LNG, taking imports to around 70m t/y LNG. A 9.9% increase equates to 193,000 tonnes, or around three standard-sized (145,000 cubic metre) tanker deliveries in March. The utility is set to receive its first Q-Flex (210,000 cm) tanker soon, according to reports.

Tepco’s fuel-import figures showed its March year-on-year fuel oil buying fell by 55%, to 67,000 litres, while crude rose by 5%, to 84,000 litres, and coal dropped by 64% to 91,000 tonnes.

Beware demand destruction

But although Japan must import more fuel to offset around 10 gigawatts of nuclear plant losses, the effect on LNG spot prices has been limited for two reasons - utility companies are securing volumes from long-term suppliers instead of the spot market; and growing fears of Japanese demand destruction.

Tepco said electricity consumption has fallen by around 20% as a result of energy-efficiency drives, lower demand for heating because of warming weather and reduced industrial activity.

Prices offered by Asian LNG buyers are not yet high enough to divert cargoes from the Atlantic basin, traders said, although this might change when demand picks up. “Now the issue is on the demand side, it seems there has been some destruction after the quake ... but when demand recovers, prices will rise to attract Atlantic volumes, which is reflected the offers we're receiving,” said one Atlantic basin-based trader.

Asian LNG spot prices were slightly firmer at around $12.00-12.50/m British thermal units this week, pushed higher by some additional buying from Japanese utility Tohoku Electric and the maintenance shutdown of Rasgas’s 4.7m t/y Train 3, which has squeezed the market. 

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