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  • China's buying power in the commodity market is legendary.

  • The country consumes much of the world's copper, cotton, and corn, to name just a few.

  • Soon we might add to the list, natural gas.

  • Beijing's long-held concern about security of supply for its energy

  • made the country dependent upon its coal and oil reserves.

  • Today, it is shifting away from highly polluting coal towards natural gas.

  • Although this year its coal consumption has bounced back,

  • it's not clear that that can last.

  • A recent academic study revealed that for those living in the more coal dependent north,

  • air pollution shortens lives by three years

  • as compared to those who live in the southern regions of China.

  • While the country has plans to expand the amount of gas it imports via pipelines,

  • in the short term China has chosen to step up its seaborne imports of liquid natural gas.

  • Up to October this year, LNG inflow has jumped 48% on average.

  • That follows a one quarter rise the year before.

  • Transporting this fuel requires specialised tankers and there are not enough of them.

  • A glut of LNG tankers booked a couple of years ago has vanished.

  • Between 2012 and 2014, the number of orders placed more than doubled to 66.

  • This year, that number has dropped to just eight.

  • Now these ships require around 30 months to build. Spot daily rental rates have thus risen.

  • Since April of last year, LNG tanker rates have roughly doubled and they are still historically low.

  • These prices could more than double again before touching the highs of five years ago.

  • Not only have China's imports picked up, but the US has begun to export its cheap gas.

  • A notable price arbitrage of around $6 per million British thermal units

  • exists between the US and Asian trading hubs.

  • Listed LNG tanker specialists have long waited for this day.

  • Companies such as GasLog and Golar LNG have operating companies,

  • as well as high-yielding master limited partnerships, listed in the US.

  • Dynagas also has an MLP listed there.

  • Another, Norway's Flex LNG awaits delivery of its vessels.

  • While there is no shortage of LNG supply to come,

  • that gas will require more vessels to transport it.

  • LNG tanker operators are now in a sweet spot, able to fuel China's needs.

China's buying power in the commodity market is legendary.

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China turns to LNG to fuel its needs | Short View

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    林恩立 posted on 2017/12/13
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