China LNG Imports Fall to Lowest Since Covid Hit Demand in 2020

China's lng imports have plummeted to their lowest level since the Covid-19 pandemic struck demand in 2020, marking a significant shift in the global LNG market. The decline in China's LNG imports, which accounted for more than 50% of the global increase in LNG demand between 2010 and 2020, has been driven by a combination of economic slowdown, government policies, and reduced coal-to-natural gas switching.



Economic slowdown has been a primary factor in the decline of China's LNG imports. China's economic growth has slowed down, leading to reduced demand for energy, including LNG. According to S&P Global Commodity Insights, China's apparent natural gas consumption declined by 1% in 2022 compared to 2021, the first decline in annual consumption since 1990. This slowdown has been exacerbated by widespread lockdowns associated with China's zero-COVID policies, which prompted the drop in natural gas consumption.

Government policies have also played a significant role in the decline of China's LNG imports. China has been reprioritizing energy supply security, including growth in coal production, over emissions targets. This shift in policy has led to a decrease in LNG imports. According to Shell's LNG Outlook 2024, China's LNG imports fell by 20% (2.0 Bcf/d) in 2022, mainly due to reduced demand and relatively high LNG spot prices. In 2022, China's LNG imports averaged 8.3 Bcf/d, the least since 2019, according to data from China's General Administration of Customs.

Reduced coal-to-natural gas switching has also contributed to the decline in China's LNG imports. The pace of coal-to-natural gas switching in China's industrial sector has slowed down, reducing the demand for LNG. According to Shell's LNG Outlook 2024, long-term gas and LNG demand outlook in China remains strong while supply diversification is also a key characteristic of the growth in the country's gas market. However, the pace of coal-to-natural gas switching has slowed down, leading to a decrease in LNG imports.

Geopolitical factors, such as China's relations with key LNG suppliers, have also played a role in the fluctuations of China's LNG imports. For instance, China's imports of LNG from Australia, its largest supplier, have been volatile due to geopolitical tensions between the two countries. In 2020, China imposed tariffs on Australian coal and other commodities, leading to a significant drop in LNG imports from Australia. Conversely, China's LNG imports from Qatar, its second-largest supplier, have been relatively stable due to the strong political and economic ties between the two countries. Additionally, China's relations with Russia, a major pipeline gas supplier, have also impacted its LNG imports. In 2021, China's LNG imports from Russia increased significantly due to the completion of the Power of Siberia pipeline. However, in 2022, China's LNG imports from Russia fell due to the Russia-Ukraine conflict and subsequent sanctions on Russia.

The decline in China's LNG imports has had a significant impact on the global LNG market. The reduced demand for LNG from China has led to a decrease in global demand for LNG, as China was the world's largest LNG importer in 2021 and 2022. This has resulted in lower LNG prices, with LNG spot prices falling by around 20% in 2022. The decline in China's LNG imports has also led to a shift in LNG trade flows, with other countries, such as Japan and South Korea, becoming more prominent in the global LNG market.



In conclusion, the decline in China's LNG imports, driven by economic slowdown, government policies, reduced coal-to-natural gas switching, and geopolitical factors, has had a significant impact on the global LNG market. The reduced demand for LNG from China has led to a decrease in global demand for LNG, lower LNG prices, and a shift in LNG trade flows. As China's economy recovers and its energy policies evolve, the global LNG market will continue to be influenced by the country's demand for LNG.