LNG's Rocky Road: Trade Tensions and Demand Slump Drive Asian Prices to Near 1-Year Low

The Asian spot liquefied natural gas (LNG) market is in a tailspin, with prices plummeting to near a one-year low as a perfect storm of weak demand, geopolitical friction, and macroeconomic uncertainty reshapes global energy dynamics. The average LNG price for May delivery into Northeast Asia fell to $11.80 per million British thermal units (mmBtu)—the lowest since mid-2024—while June’s price dipped further to $11.30/mmBtu, underscoring a market grappling with structural imbalances.

The Demand Drought

The slump is partly seasonal, with milder-than-expected weather reducing heating and cooling needs. But underlying trends are more worrying. Japan and South Korea, traditional LNG buyers, have delayed restocking as inventories remain elevated. “High storage levels have left buyers cautious, even as prices hit rock bottom,” said a Tokyo-based trader. Analysts note that subdued industrial activity in Asia’s export-dependent economies has also dampened gas consumption.

Trade tensions between the U.S. and China have exacerbated the downturn. Beijing’s decision to halt purchases of U.S. LNG—after Washington imposed tariffs on Chinese goods—has redirected cargoes to Europe, where prices remain relatively higher. China, now the world’s largest LNG importer, is reselling existing U.S. shipments, further depressing Asian spot rates.

Geopolitics and Arbitrage

The trade war has reshaped global LNG flows. With U.S. tariffs raising import costs, China’s state-owned firms have turned to suppliers like Australia and Qatar. Meanwhile, U.S. LNG shipments to Asia, once profitable, now face uncompetitive pricing. “Arbitrage windows to Asia have closed for U.S. exporters,” said Rystad Energy analyst Wei Xiong. Instead, cargoes are diverting to Europe, where the North West Europe Marker (NWM) for May delivery traded at $10.13/mmBtu—a $0.80 discount to the Dutch TTF hub but still above Asian prices.

European demand, buoyed by strong industrial consumption and lower renewable output, has absorbed redirected supplies. For instance, an Angolan LNG cargo originally destined for Asia was rerouted to France. This shift reflects a broader trend: Asia’s weakening purchasing power is pushing traders toward Europe’s steadier market.

Freight Rates Signal Bearish Sentiment

The market’s pessimism is mirrored in plunging freight rates. Atlantic LNG tanker rates have dropped for three straight weeks to $22,500/day, while Pacific rates hover at $24,750/day—both near 2024 lows. “Lower freight costs reflect oversupply and weak demand,” noted Kpler analyst Go Katayama. Yet even this has done little to stabilize prices, as traders anticipate further declines.

Macro Clouds Loom Larger

The price collapse is not just a supply-demand story. Recession fears, driven by trade wars and supply-chain disruptions, have sapped industrial activity. China’s gas consumption growth, once a pillar of LNG demand, is now stagnant, with Beijing prioritizing economic stability over energy imports. The U.S.-China tariff pause announced in April offered only fleeting relief, as unresolved disputes and tariffs on non-energy goods continue to chill trade.

Outlook: When Will the Bottom Hold?

Analysts warn prices could fall further unless weather patterns shift or inventories drain. “Prices need to drop below $12/mmBtu to trigger restocking,” Katayama said, adding that prolonged weakness could force producers to cut output. For investors, the turmoil highlights LNG’s vulnerability to geopolitical and macroeconomic shifts.

Stocks of U.S. LNG exporters like Cheniere Energy (LNG) have mirrored the price slump, down 20% since tariffs were announced. Meanwhile, Asian importers such as JERA and SK E&S face margin pressure as prices undercut long-term contracts.

Conclusion

The Asian LNG market’s nosedive is a microcosm of today’s energy challenges: interconnected markets, policy-driven volatility, and demand dependent on fragile global growth. With prices at $11.30/mmBtu—nearly 40% below their 2024 peak—the pain is acute for producers. Yet the downturn also exposes opportunities. Europe’s stronger demand could buoy prices there, while Asian buyers may secure bargains—if they can stomach the geopolitical risks.

Investors must monitor two critical factors: whether China’s economy stabilizes enough to boost gas demand and whether U.S.-China trade relations thaw. Until then, LNG’s “rocky road” will remain lined with caution.

As Wei Xiong succinctly put it: “This isn’t just a price cycle—it’s a structural reckoning for LNG’s role in a fractured world.”