Bloomberg
With liquefied natural gas (LNG) prices reeling from the triple whammy of a mild winter, rising supply and China’s hobbled economy, Japan may be about to land another blow.
Electricity consumption, the biggest outlet for LNG in the world’s top importer of the fuel, is expected to drop after Prime Minister Shinzo Abe’s shock announcement urging schools to shut for about a month from March 2 in response to the spread of the coronavirus.
While most factories remain open across the country, a growing number of offices are requiring staff to work from home for a few weeks.
Although the impact on demand remains uncertain, the virus woes come as Japanese buyers were already struggling with high inventory levels from a milder-than-normal winter.
China and South Korea, the second- and third-biggest importers, are also grappling with the virus and brimming stockpiles, leaving few outlets to sell or swap cargoes.
“There will be downside risk, but it’s still early days,†Lucy Cullen, a Singapore-based analyst at Wood Mackenzie, said by email. “Power demand comprises nearly two-thirds of Japan’s LNG demand. For there to be a big impact on LNG in Japan, this will need to be a fall in electricity demand and in turn lower requirements for gas-fired power generation.â€