China offloads spare LNG as lockdowns hit demand

China, the world's biggest importer of liquefied natural gas, is trying to sell some spare supply due to fears that demand-sapping virus lockdowns could spread from Shanghai to other parts of the country.

Major buyers, including CNOOC (0883), are offering at least five shipments for summer delivery on the spot market amid the deteriorating domestic outlook, according to traders with the knowledge of the matter. The companies could look to offload more cargoes if Covid restrictions around China increase, the traders said.

The continuing spread of the coronavirus in Asia's largest economy and Beijing's strict Covid Zero approach to try and contain it are spurring concern growth will take a bigger hit than previously anticipated. Iron ore, a key economic barometer, slumped yesterday as news of mass testing of people in a neighborhood in the Chinese capital spooked the market.

Around half of China's gas consumption is in provinces marked by the government as having high or medium Covid risk, according to BloombergNEF analyst Daniela Li.

China doesn't produce any LNG domestically for export, so the companies are trying to resell the cargoes to new buyers in Asia. The firms have scope to offload shipments of the super-chilled fuel as they are sitting on relatively high inventories, according to the traders. They will also be attracted by international prices that are well above domestic rates, they said.