LNG Shortage More Urgent Than Oil! Asia Paying Premium to Secure Supply, China's Petrochemical Opportunity May Be Coming

Middle Eastern conflicts impact energy supplies, but the market finds that for Asia, LNG is a more urgent issue than oil.

According to the latest Bloomberg report, as the Middle Eastern conflict continues, Asian LNG buyers are preparing for months of supply disruptions. Traders reveal that Thai companies are seeking spot LNG deliveries before May; Bangladesh has purchased April shipments and is considering locking in May supplies; major Korean buyers also plan to increase purchases over the next two months.

These actions send a clear signal: Asian importers are no longer betting on a short-term resolution of the conflict.

The main impact comes from Qatar. Last week, after an Iranian drone attack, Qatar shut down the world’s largest LNG export facility—Ras Laffan. This facility produces about 77 million tons of LNG annually, accounting for roughly 20% of global supply. The supply disruption has caused European natural gas prices to soar, directly impacting the cost structure of Europe’s chemical industry. Analysts believe that, given only 4% of China’s imports come directly from the Middle East, Chinese chemical companies have gained a significant competitive advantage.

LNG prices surge, and Asia begins “bidding higher for cargo”

The supply shock is quickly reflected in prices.

Traders say that current spot LNG prices in Asia are about $18 per million British thermal units. Although this is a decline from last week’s high of around $25, it remains about 80% higher than pre-conflict levels.

More importantly, the price structure has changed. Market data shows that the Asian LNG benchmark spot market (JKM) price remains significantly above the European natural gas benchmark price (TTF). ING analysts note:

“The Asian benchmark JKM price continues to stay above the European natural gas benchmark TTF, attracting spot LNG ships to shift toward Asia.”

Shipping data confirms this: since the conflict erupted, at least nine ships originally scheduled to deliver to Europe have rerouted to Asia.

Asia’s LNG risk exposure is higher than that of oil

Morgan Stanley’s report states that for economies sourcing LNG from the Middle East, shifting to other sources will be very difficult. Due to storage constraints, most Asian economies have limited inventories, and the impact is amplified in spot prices and availability.

Qatar’s LNG shutdown has essentially wiped out the previously expected supply surplus in 2026. Asian buyers are extending procurement plans from immediate delivery to the coming months, reflecting a significant cooling of market expectations for a quick resolution of the conflict.

According to Bloomberg, citing informed traders, Thai buyers are seeking to purchase LNG cargoes with delivery as far as May; Bangladesh has bought April shipments and is considering procurement for May and beyond; major Korean buyers are also preparing to replenish supplies over the next two months.

Opportunities for Chinese chemical companies: expanding market share amid high European costs

As previously reported by Wall Street Jingwei, the LNG outage in Qatar has caused European natural gas prices to soar, directly impacting the cost structure of Europe’s chemical industry.

HSBC Qianhai Securities’ analysis indicates that vitamins, methionine, and polyurethanes (MDI/TDI) are the segments most sensitive to rising European natural gas prices. Europe holds a significant share of the global capacity for these high-margin chemicals.

As European producers face cost pressures, and with only 4% of Chinese imports coming directly from the Middle East, Chinese chemical companies are gaining a notable competitive edge.

Amid tense geopolitical tensions, producers have begun raising prices, and distributors are increasing inventories of MDI/TDI and feed additives to hedge against rising costs.

From a profit elasticity perspective, HSBC Qianhai Securities estimates:

If methionine prices increase by 5,000 yuan/ton to 25,000 yuan/ton, related companies’ earnings per share could rise by about 29%;

For every 1,000 yuan/ton increase in MDI spread, profits are expected to increase by approximately 15%;

For pure MDI and TDI spread increases of 1,000 yuan/ton, profits are projected to rise by about 7% and 9%, respectively.

The report suggests that this high profitability could support structural expansion of Chinese chemical companies in these fields.

Investors should next monitor three key variables: the duration of Ras Laffan’s shutdown, whether Asian spot markets continue “bidding higher for cargo” and squeezing Europe, and how the rise in European natural gas prices affects chemical price increases and profit margins’ speed of realization.

Risk warnings and disclaimers

Market risks exist; investment should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk.