China's General Administration of Customs released import statistics showing utilities imported 4.71 million tonnes of liquefied natural gas (LNG) in August, to reach 32.63 million tonnes in the first eight months of 2018.
This puts China on track to overtake Japan as the largest importer of LNG in the world as early as 2019.
The August import numbers were 51.5 percent above the same period in 2017, according to the Customs Authority. Imports of natural gas have grown to meet increasing demand driven by environmental policies to replace coal-fired electricity generation.
The rapid growth in LNG imports is also driving the cost of transportation higher, with Atlantic cargoes bound for Asia approaching $100,000 per day for Large LNG carriers, up from $30,000 per day a year ago.
In addition to China's appetite for LNG, utilities in Japan and South Korea have also been storing up LNG for the winter season.
'If you’re at $85,000 now, you could easily see $115,000 to $120,000 in the winter’, US investment bank Jefferies’ energy shipping analyst Randy Giveans told Reuters.
More tonne miles from longer distances covered to transport LNG from new terminals in the United States and Arctic Russia, as well as a limited number of ships, is adding further momentum to the bullishness in the LNG shipping market. Combined, these factors have led to a strong period charter market for LNG carriers, spurring owners to add a record number of new build ships to the shipyard order book.
The global LNG fleet is set to expand by a record volume in 2018, as 64 new vessels hit the water totaling over 360 million cubic feet of cargo carrying capacity. The growth in the fleet however, is not enough to keep up with the short-term, but long-distance demand of Asian buyers.
Over 70% of global LNG cargoes are destined for the Asia-Pacific region, with Japan, China, and South Korea being the top three importers in the world. These factors are set to keep LNG freight rates elevated well into 2019 and beyond.
Scottish Energy Research and Consultancy firm Wood Mackenzie however, warns in a recent report that shipping firms should be wary of ordering too many more vessels now because of the potential for a glut of LNG at some point between 2020 and 2025, adding that new projects coming onstream may find there are not enough buyers.