TOKYO: Japan’s LNG imports fell 4.7% year on year to 40.84 million mt over January-June, indicating the steady demand seen since 2009 may have peaked, data from Platts’ unit Eclipse Energy showed Wednesday.
For June alone, LNG imports stood at 6.29 million mt, down 9.6% year on year, according to Eclipse data.
Warmer-than-average weather, the increasing use of solar power and a slowing economy were curbing LNG demand, resulting in inventories piling up at Japanese utilities, market sources said.
The average temperature in May set a record high in many Japanese cities including Tokyo, where it was 2.9 degrees Celsius higher than the 30-year average.
May LNG demand at 5.6 million mt was lower than the contracted volume of 5.75 million mt as a result, according to Eclipse.
Limited demand from Japanese buyers weighed on spot prices over H1, with the Platts Japan Korea Marker falling 27% since the start of the year. The Platts JKM for August delivery was assessed at $7.30/MMBtu Tuesday.
Looking ahead, Eclipse expects overall demand to be 85 million mt in 2016, against that year’s overall contracted volume of 74 million mt.
This indicates that under normal weather conditions, some spot deals were expected to take place in the year, Eclipse said.
Japan introduced a feed-in-tariff or FIT program in 2012 to boost the use of renewable energy, and solar power generation is rapidly gaining currency.
The volume of solar-generated electricity purchased by five major Japanese power utilities under the country’s FIT program almost doubled in the fiscal year April 2014-March 2015 from the year before.
Tokyo Electric Power Co. bought 4.7 billion kWh of electricity generated by solar in the fiscal year to March, up from 2.3 billion kWh a year earlier, which equates to about 313,300 mt or five cargoes of LNG requirement, based on Platts calculations.
Chubu Electric bought 3.2 billion kWh of solar-generated electricity, equivalent to 213,000 mt of LNG requirement, and Kansai Electric about 2.2 billion kWh, equivalent to 144,300 mt. Rooftop solar panels on houses are another factor, although the extent of their impact was not clear.
“People can supply their own electricity and not use our electricity, but I don’t know how much of that is affecting our demand for LNG,” a source close to a Japanese utility said. In addition, overall power demand is Japan is on a downtrend.
Electricity demand from large-scale industrial users fell 3.3% year on year in May, according to the Federation of Electric Power Companies of Japan. It has fallen each month since May last year, after a consumption tax was raised to 8% from 5% in April 2014. “Demand is not picking up; the overall economy is not doing that great,” another utility source said.
