Highlights

  • Mild temperatures could limit annual gas demand growth in Northeast Asia this winter
  • Rising Indian gas demand is being fuelled by increased LNG imports
  • Growth in Southeast Asian LNG demand will be insufficient to balance declines elsewhere
  • Seasonal support for spot LNG prices in Northeast Asia is failing to materialise

Economic overview

China’s economic growth is expected to ease over the next two years, slowing expansion in other Asian markets.

China’s GDP growth will fall to 6.8% in 2015, down from 7.3% last year, according to the latest outlook from the OECD. This trend is expected to continue in the coming years, with growth falling to 6.5% in 2016 and 6.2% in 2017. A slump in the housing market has been contributing to the economic slowdown and could weigh on growth even more next year. The construction boom of recent years has led to a surplus of housing in major cities, resulting in falling prices. China’s reduced demand for imports is expected to hit its largest trading partners in the region, including Indonesia, Thailand, Malaysia and Japan – which all send it significant shares of their exports. Despite the economic slowdown, China’s gas market could still rebound next year.

Asia GDP outlook

  2014 2015 2016 2017
Australia 2.7% 2.2% 2.6% 3.0%
China 7.3% 6.8% 6.5% 6.2%
India* 7.3% 7.2% 7.3% 7.4%
Indonesia 5.0% 4.7% 5.2% 5.5%
Japan -0.1% 0.6% 1.0% 0.5%
South Korea 3.3% 2.7% 3.1% 3.6%
*Fiscal year. Source: OECD.

Japan’s economy is expected to grow by 0.6% in 2015, after having contracted last year, and the OECD has forecast a further increase in GDP growth for 2016. Although Japan’s initial data for Q3 2015 indicated it had entered recession, revised figures show the country narrowly avoided it. Q3 GDP is now estimated to have grown by 1% on an annual basis. Greater capital expenditure is supporting growth. Japan’s LNG imports have been falling on an annual basis in recent months, and weak economic growth will limit the potential for gas market expansion next year.