SEOUL: South Korea’s liquefied natural gas (LNG) imports have fallen sharply in recent months, declining by an average of 17.8% year-on-year across January to April. The fall was prompted by a mix of high inventory levels and lower consumption, which undercut demand for spot LNG. In H215, we expect limited activity on the Asian spot market among Korean buyers, placing downward pressure on LNG spot prices.
According to data from the Korean Energy and Economics Institute (KEEI), South Korean LNG inventories stood at 75% capacity as of end-2014, compared to 53% at end-2013.
The overbuying of LNG earlier in the year was partly at fault for the build. Another factor was a marked slowdown in the economy in Q414, which depressed demand for gas.
Economic sluggishness has continued into 2015 and we forecast below-consensus real GDP growth of 2.8% for the year, reflecting muted domestic consumption and continued export constraints.
