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Thursday November 30, 2017

LNG imports set to hit record amid rising demandCHINA’S imports of liquefi ed natural gas (LNG) are set to hit record levels in November, with demand due to peak over the cold winter months as millions of households shift from burning coal for heating to using gas, driving up prices for the fuel.

Although the world’s No. 2 economy has signifi cant local gas reserves and can also import via pipelines, most of the jump in demand will be met by LNG tankers.

Shipping data in Thomson Reuters Eikon shows Chinese LNG imports will reach 4 million tons for the fi rst time in Novem-ber, breaking the 3.7-million-ton

record from last December.That comes as residents

across Northeast China have had their households con-verted from coal to natural gas for heating this winter.

A colder-than-usual start to winter is also stoking appetite for gas, with Thomson Reuters Eikon data showing the par-ticularly frigid spell will last until at least mid-December.

Growing appetite for gas pushed domestic LNG prices to record highs of over 7,000 yuan (US$1,060) per ton this week.

Although China’s LNG demand is still only half that of top consumer Japan, traders say China has become the key

driver of Asian spot LNG prices LNG-AS, which have jumped by 80 percent from mid-2017 to almost US$10 per million British thermal units, their highest since January 2015.

“We’ve been supplying a lot of China’s LNG from the spot market, bringing a fair amount of liquidity to a market otherwise dominated by long-term supply contracts,” said an LNG trader in Singapore, declining to be identifi ed.

Surging Chinese demand has tightened Asian LNG markets, which since 2014 have been marked by oversupply on the back of rising exports.

Going into 2018, analysts

say much will depend on the speed of a production ramp-up in Australia, where the last of a number of mega-projects is being completed after more than a decade and at a cost of well over US$200 billion.

“Australia will export 58.1 million tons of LNG in 2017-18, based on the assumption that some terminals will run well below nameplate capacity,” National Australia Bank (NAB) said yesterday.

“This forecast is somewhat below the Department of Indus-try’s forecast of 63.3 million tons over the period.”

Australian exports stood at 52 million tons in 2016.

With Royal Dutch Shell’s Prelude fl oating LNG project in Western Australia and Ichthys, a massive project led by Japan’s Inpex in the north of Australia, about to be completed, Australia’s export capacity could hit 85 million tons next year, topping that of current leader Qatar.

Traders said Australia’s rising capacity would ensure LNG mar-kets will remain well supplied, despite China’s thirst.

“Available export capac-ity remains well in excess of import capacity, so there’s no need to panic. Everybody who needs LNG can get it,” said the LNG trader. (SD-Agencies)

At a Glance

Downward pressureTHE economy is still facing relatively large downward risks that may become apparent by early 2018, a senior offi cial of the banking regulator said yesterday.

Yu Xuejun, head of the China Banking Regulatory Commission’s regulatory board for key State-owned fi nancial institutions, said during a event hosted by Caijing that China’s economic stimulus measures have been overly strong, resulting in asset bubbles.Auto investment fundNIO Capital, an investment firm founded by leading Chinese electric vehicle maker NIO, is in talks with prospective investors to raise up to US$500 million in a U.S. dollar fund aimed at the country’s auto sector, sources with knowledge of the plans said.

The fund, Shanghai-based NIO Capital’s fi rst U.S. dollar fund, will complement its onshore investments by focusing on foreign tech start-ups and Chinese fi rms using overseas structures such as variable interest entities, the sources said.

An employee walks between front-end loaders which are used to move coal at a port in Dandong, Liaoning Province, in this fi le photo. The government has again urged coal suppliers and buyers to sign more medium and long-term contracts amid robust demand. SD-Agencies

THE government has again urged coal suppliers and buyers to sign more medium and long-term contracts, amid robust demand for the fuel during the peak winter-heat-ing season.

The National Development and Reform Commission (NDRC), the country’s top eco-nomic planner, said in a docu-ment published yesterday that medium to long-term contracts

should make up 75 percent of supply deals signed by govern-ment and municipal authorities as well as power fi rms.

It added that railways, ports and shipping fi rms should make handling such contract business a priority. Contracts should run for at least a year.

The NDRC had already ordered coal companies and utilities in April to fi x 75 per-cent of their total coal purchases

through long-term contracts.But Chinese thermal coal

futures have still surged this year, recently rallying about 7 percent since early November to 655.6 yuan (US$99.29) per ton.

The NDRC also warned that contracts must be strictly fulfi lled, and that it would strengthen supervision of con-tracts of more than 200,000 tons. (SD-Agencies)

Regulator supports longer-term coal contracts

REGULATORS issued guide-lines Tuesday for the estab-lishment of a system to track overseas investments with the aim of preventing tax fraud, money laundering, illegal fi nancing, and activities damag-ing the country’s reputation.

In a statement on its website, the National Development and Reform Commission (NDRC) warned that the government will record and tally instances of laws and regulations being broken in China or abroad, and offenders would be pun-ished.

The plan, jointly issued by 28 government departments, is part of efforts to regulate fi rms’

overseas investments and busi-ness activities as China’s infl u-ence in the global economy grows, especially through its Belt and Road Initiative.

In addition to illegal activi-ties, the guidelines specifi cally say actions that “violate inter-national conventions and reso-lutions of the United Nations, or that disrupt foreign economic cooperation, adversely impact the Belt and Road Initiative, or harm China’s reputation” will be recorded.

The guidelines also focus on monitoring cross-border capital fl ows by insisting overseas deals are reasonable and disclosures are accurate.

China started to clamp down on capital outfl ows last year after its foreign currency reserves fell by nearly US$1 trillion. In August, the govern-ment laid out rules restrict-ing investments in property, hotel, fi lm, entertainment and sports. But the government also encouraged companies to sup-port the nation’s Belt and Road Initiative.

Companies or individuals that break rules will be penalized in various ways. Authorities could reject their applications for overseas investments and foreign exchange purchases, restrict access to government subsidies and refuse to sell

State land, the NDRC said.Records of infractions will

be available publicly through the government’s website www.creditchina.gov.cn, the notice said. No timetable for implementing the system was given.

Authorities responsible for vetting applications to set up banks or acquire stakes in fi nan-cial fi rms will be able to refer to the records before granting approval.

China’s non-fi nancial out-bound direct investment from January to October fell 40.9 per-cent year on year to US$86.31 billion, according to the Ministry of Commerce. (SD-Agencies)

New system to monitor firms’ overseas investments

HNA Group CEO Adam Tan said the acquisitive company is making adjustments to conform with government policies, and has sold some investments and real estate projects to improve its liquidity, domestic media reported yesterday.

Tan said the company would not invest in those areas not backed by the government, while supporting the Belt and Road Initiative, The 21st Century Herald reported.

“Companies cannot invest chaotically overseas, because chaotic investment creates trouble,” Tan was quoted in a separate article by the media portal Sina.com.

Assets that could be sold include buildings and holdings in industries where investment is being restricted by the govern-ment, Tan said. Disposals would help HNA improve its liquidity and cash fl ow, he said.

HNA Group, which has agreed to deals valued at more than US$50 billion over two years, including stakes in Hilton World-wide Holdings Inc. and Deutsche Bank, is facing increased scrutiny from regulators and bankers due to announced changes to its shareholding structure and its use of leverage.

The group is also planning an initial public offering of Zurich-based Gategroup Holding AG next year, Bloomberg reported, quoting Tan.

The Swiss Takeover Board said last Friday that HNA gave partially untrue or incomplete information during the takeover of Swiss airline catering fi rm Gategroup, which the conglom-erate bought for US$1.5 billion last year.

The Swiss regulator said the aviation, hospitality and fi nan-cial services group had failed to disclose that company execu-tives held controlling stakes in the conglomerate and also gave incorrect shareholdings for the top two stakeholders — Bharat Bhise and Guan Jun — in the Gategroup offer prospectus.

(SD-Agencies)

HNA asset sales seen as part of adjustment