Highlights

  • Demand from the leading markets in Asia Pacific is expected to rise by around 4% year on year in 2014 as a whole
  • Increases in regional production will help meet seasonal demand over the coming months
  • Heating-related demand will be moderate through the end of the year
  • Spot LNG prices in Asia have actually fallen since mid October to $13-13.5/MMBtu as of mid November

Economic overview

Weak growth in Asia’s largest economies will dampen annual gas demand growth throughout winter.

China’s economy is continuing to slow down. The country’s manufacturing PMI was 50.8 in October, down from 51.1 in September. Consumer inflation was also flat month on month, increasing the risk of deflation. As the economy has cooled, so too has gas demand growth. Although demand is still increasing, economic expansion is likely to remain subdued, meaning support for gas market growth is also likely to be weak compared with last year over the coming months.

Quarterly annual GDP growth

  Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Japan -0.1% 1.3% 2.4% 2.4% 2.7% -0.1% -1.1%
Korea 2.2% 2.7% 3.4% 3.6% 4.0% 3.5% 3.2%
China 7.7% 7.5% 7.8% 7.7% 7.4% 7.5% *7.3%
India 4.5% 4.6% 5.1% 4.5% 5.8% 5.9% *5.6%
Indonesia 6.0% 5.8% 5.7% 5.6% 5.3% 5.1% 5.0%
Source: OECD. *IMF projections.

Japan’s economy contracted in again Q3. GDP in Q3 fell by 1.1 on an annual basis%. It was not expected and means that Japan has entered a technical recession. Japan’s gas demand has been growing this year, and the lower price of oil will help ease its fuel import bill. Although this should support LNG imports and gas demand growth, the latest economic results could undermine gas market expansion going into next year.

South Korea’s economy is struggling – its manufacturing sector is contracting and exports are falling. The country’s GDP growth fell to 3.2% in Q3, down from 3.5% in Q2. The manufacturing PMI fell to 48.7 in October – a four-month low. The weakened yen has made Japanese exports more competitive, affecting demand for South Korean goods. South Korea’s gas demand has been falling this year; this trend is expected to continue as the country’s economic problems affect the amount of gas used by manufacturers and domestic consumers.