Price of Liquefied Natural Gas Jumps 10.2% as Winter Arrives in North China

What’s new: The factory cost of liquefied natural gas (LNG) in China has risen 10.2% as of Friday from the end of September to 2,950 yuan ($439.80) per ton as winter arrives in Northern China, according to a Shanghai Petroleum and Natural Gas Exchange index that tracks 50 LNG plants and terminals in the country.

Despite the increase in recent weeks, the price remains lower than it was at the same time last year, when it hovered around 3,500 yuan per ton.

Data from commodity research firm Sublime China Information Co. Ltd. showed that LNG plants in the country were operating at more than 60% of their capacity in early September, and at 63.36% on Friday. By contrast, the plants weren’t operating at that rate until mid-November last year.

What’s the background: LNG is crucial for the country’s winter heating supply as China aims to reduce the use of coal because it is a major source of pollution.

Several regional policies have been issued since 2016 calling for coal-fired heating to be replaced by natural gas-powered systems, especially in the Beijing-Tianjin-Hebei region that has long suffered severe air pollution in winter.

The higher price of natural gas, however, has previously left many low-income residents in rural areas without the means to heat their homes, forcing some to burn coal secretly to survive the freezing weather. That drove the government to loosen the sweeping ban of coal use in some cities last year.

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Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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