China’s LNG imports fall 19% from 2024 peak: Coal, weak demand and high prices explain the shift

China is set to lose its position as the world's largest liquefied natural gas (LNG) importer to Japan this year, as high prices, weak domestic demand and a changing energy mix weigh on its purchases. Analysts expect Japan's LNG imports to marginally exceed China's in 2026, marking a reversal in the global gas trade after China took the top spot in 2021.

According to consultancy ICIS, Japan is expected to import 62 million tonnes of LNG this year, compared with China's 61 million tonnes. Kpler's estimates are slightly higher, projecting Japanese imports at 63 million tonnes and Chinese imports at 62 million tonnes. China last lost its position to Japan in 2022.

The shift also highlights the slowdown in China's LNG demand. Its imports are projected to decline by around 19% from the 2024 level of approximately 77 million tonnes, reflecting a combination of structural changes in energy consumption and near-term market pressures.

Why is China buying less LNG?

China's LNG demand has remained below its earlier peak following a sharp decline during the Covid-19 pandemic. The country has increasingly turned to cheaper alternatives, including domestically produced natural gas, pipeline imports and renewable energy.

Coal also continues to play a significant role in China's energy mix, accounting for nearly half of its electricity generation. This gives the country greater flexibility to reduce purchases of expensive imported gas and rely on domestic fuel supplies when international prices rise.

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The slowdown in economic activity has added to the pressure. Weakness in sectors such as property and manufacturing has affected industrial energy consumption, reducing the need for additional LNG supplies.

High prices and mild winter forecasts weigh on imports

China's LNG purchases have faced further pressure this year from higher international energy prices, driven by the conflict in the Middle East, and by expectations of a relatively mild winter.

According to Xiong Wei, vice president at Rystad Energy, China had largely completed its pre-winter gas injections by the end of September, with underground storage facilities already 80-90% full. Storage levels in some regions were also above historical averages, reducing the urgency to purchase additional spot cargoes.

ICIS analyst Alex Siow said the decline reflected a more fundamental change in demand rather than a temporary disruption. However, he added that lower spot prices could bring some suppressed demand back into the market. Higher prices are currently keeping up to 15 million tonnes of annual spot LNG demand off the table.

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Japan's LNG demand also faces structural changes

Japan's position as the world's largest LNG importer is also not driven by rising demand. Its imports are declining, although at a slower pace than China's, as several nuclear reactors have restarted in recent years, reducing the country's dependence on imported gas. The changing import patterns of the two Asian economies could influence global LNG trade flows. With China holding back purchases and Japan's demand also moderating, more LNG cargoes could become available to buyers in Europe and other markets.

Market participants will closely watch China's November import figures to assess whether lower prices can bring buyers back into the spot market.

(With Reuters inputs)