Highlights

  • Temperatures have dropped, but demand remains weak
  • New LNG supplies from Australia will add to the supply glut in Q1
  • Despite colder weather, the upside for additional LNG purchases is limited
  • Spot LNG prices dropped below $7/MMBtu at the start of the year

Economic overview

GDP growth in some major Asian markets will improve this year - but not in China.

Trading on China’s stock market stopped twice during the first week of 2016 when circuit-breakers halted trading after falls of 7% on two days. The value of China’s currency also fell at the start of January. However, despite speculation about the potential implications for the wider economy, the slowdown in China’s economic growth is expected to be gradual. China’s GDP is estimated to have grown by 6.9% in 2015, and it will expand by 6.7% in 2016, according to the latest World Bank Global Economic Prospects (GEP). The lower value of the renminbi should boost exports as it will make them more competitive. Despite a decline in GDP growth this year, gas market expansion is expected to be stronger than it was in 2015. This growth will be partially driven by the lower gas price.

Japan’s GDP growth is expected to improve this year. The Japanese economy is estimated to have grown by just 0.8% in 2015, but the World Bank forecasts growth of 1.3% in 2016. However, poor domestic demand and weak demand for exports will limit economic expansion. Japan is not expected to hit its inflation targets until 2017. Japan’s improved GDP growth this year is not expected to result in corresponding growth in the gas market. As more nuclear plants restart during the year demand for gas from the power sector will decline. This will balance out any gains in other sectors, limiting the potential for gas market growth.

Asia GDP growth forecast

  2015 2016 2017 2018
Japan 0.8% 1.3% 0.9% 1.3%
China 6.9% 6.7% 6.5% 6.5%
Indonesia 4.7% 5.3% 5.5% 5.5%
Thailand 2.5% 2.0% 2.4% 2.7%
India* 7.3% 7.8% 7.9% 7.9%
*Data for India are reported on a fiscal year basis.
Source: World Bank Global Economic Prospects, January 2016

India’s GDP will grow by 7.8% in 2016, according to the GEP. This is an improvement compared with last year, when growth was 7.3%. India’s economic expansion is forecast to outpace that of any other country in the region. India has benefited from lower oil prices and strong rates of investment, and continued reforms should support the 2016 growth forecast. Indian gas demand is also expected to rise, and the country will continue to take advantage of cheap LNG over the coming months.