The week-long compressor failure at the Hammerfest LNG liquefaction plant in the Arctic part of Norway at the beginning of January, the temporary interruption to production at the Shah Deniz natural gas field in Azerbaijan due to damage to the underwater pipeline for gas condensates from the Alfa production platform to the Sangachal terminal and the attack on a compressor station on the TurkStream pipeline in Russia by Ukraine dominated the headlines.

These negative reports are leading to ongoing uncertainty among gas traders - and consequently to rising prices in an already tight market - although no supply problems are expected in the short term due to the relatively high level of natural gas in storage. The positive news - from an EU perspective - with regard to the short and medium-term LNG supply, primarily for the refilling of natural gas storage facilities in summer and autumn 2025, is simply not mentioned or not taken into account.

China's additional appetite for gas is falling. The previously double-digit annual growth rates are moving towards 6% for 2025 - after growth of 9.4% in 2024. This is mainly due to a surplus in Chinese coal production, the increasing share of renewables in electricity generation and a relatively weakening economy - especially as Chinese companies are preparing for a looming trade war with the US. This does not bode well for LNG imports, especially considering that imports of Russian pipeline gas (Power of Siberia) and domestic production volumes (including coal bed methane) are increasing. Considering that Guangdong province, China's economic powerhouse, is already reducing electricity costs to maintain the competitiveness of the export industry in the face of the looming trade conflict with the US, one can guess the impact on LNG imports. LNG is certainly the most expensive "gas source" so LNG gas will be the most expensive fuel for power generation. Chinese think tanks believe that the price of fuel for power generation should be around $7/MMBTU (million British thermal units), or around €23.2/MWh. The current LNG price in China is around twice this amount. It should also be taken into account that Guangdong is developing an electricity trading market to enable companies to be supplied by the cheapest electricity supplier, which means that cheap fuel will also be increasingly used for power generation.

When all of these factors are taken into account, it becomes clear that LNG growth in China will be rather subdued in the short and medium term. The slowdown in annual growth rates should have a dampening effect on LNG prices in the EU, especially during the storage refuelling phase. If the strategy of the traders is to sell the volumes stored in the natural gas storage facilities at high prices at present and to buy and store them at lower prices in the summer, this approach could lead to success. However, technical problems - as mentioned above - delayed commissioning of LNG liquefaction plants, geopolitical developments or terrorist attacks on the gas infrastructure could thwart this logic.