LNG shortage is more urgent than oil! Asia bids higher to secure supplies, and amid the crisis, opportunities may arise for Chinese chemical companies.

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The Middle East conflict is impacting energy supplies, but the market has found: for Asia, LNG is a more urgent problem than oil.

According to the latest report from Bloomberg, as the Middle East conflict continues, Asian LNG buyers are preparing for months-long supply interruptions. Traders reveal that Thai companies are seeking LNG spot cargoes for delivery before May; Bangladesh has already purchased April shipments and is considering securing May supplies as well; major buyers in Korea also plan to increase purchases in the coming two months.

These moves send a clear signal: Asian importers are no longer betting on a short-term end to the conflict.

The main impact comes from Qatar. After an Iranian drone strike last week, Qatar shut down the world’s largest LNG export facility—Ras Laffan. This facility produces about 77 million tons of LNG per year, accounting for around 20% of global supply. The resulting supply cut caused European natural gas prices to surge, directly impacting the cost structure of Europe’s chemical industry. Analysis suggests that since only 4% of China’s imports come directly from the Middle East, Chinese chemical companies have gained a significant competitive advantage.

LNG Prices Surge, Asia Starts "Bidding Up to Grab Cargo"

The supply shock is quickly reflected in prices.

Traders say the current Asian spot LNG price is around $18 per MMBtu. Although it has fallen from last week’s high of about $25, it is still about 80% higher than before the conflict.

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

“Asia’s benchmark price JKM continues to be higher than the European benchmark TTF, so spot LNG cargoes are being diverted to Asia.”

Shipping data confirms this: since the conflict began, at least 9 LNG cargoes originally destined for Europe have been diverted to Asia.

Asia Has Greater Exposure to LNG Risks Than to Oil

Morgan Stanley noted in a report that for economies sourcing LNG from the Middle East, turning to other suppliers will be very challenging. Due to storage limitations, most Asian economies have limited inventories, so disruptions are more easily magnified in spot prices and spot availability.

The shutdown of Qatari LNG production has basically erased the surplus supply expected for 2026, and Asian buyers are extending procurement plans from the spot market to several months ahead, reflecting a sharp cooling in expectations that the conflict will quickly resolve.

According to traders quoted by Bloomberg, Thai buyers are seeking LNG cargoes for delivery as late as May, Bangladesh has bought April shipments and is considering purchasing supplies for May and beyond, and major Korean buyers are also preparing to restock over the next two months.

The Opportunity for Chinese Chemicals: Market Share Expansion Amid High European Costs

According to a previously published article on Wallstreetcn, the surge in European natural gas prices due to the Qatari LNG supply cut directly hit the cost structure of the European chemical industry.

Analysis from HSBC Qianhai Securities says that vitamins, methionine, and polyurethanes (MDI/TDI) are the segments most sensitive to the increase in European gas prices. Europe plays a major role in global capacity for these high-margin chemicals.

As European producers face cost pressures, with only 4% of China’s imports coming directly from the Middle East, Chinese chemical firms have gained a significant competitive edge.

Amid tense geopolitics, producers have started raising prices, and distributors are also increasing inventories of MDI/TDI and feed additives to hedge against price hikes.

In terms of profit elasticity, HSBC Qianhai Securities estimates:

If methionine prices rise by 5,000 RMB/ton to 25,000 RMB/ton compared to the base assumption, related companies’ EPS could rise by about 29%;

For each 1,000 RMB/ton increase in the spread of aggregated MDI, related company profits are expected to increase by about 15%;

For each 1,000 RMB/ton rise in pure MDI and TDI spreads, profits are expected to increase by about 7% and 9%, respectively.

The report suggests that these high profit margins are likely to support the structural supply expansion of Chinese chemical companies in these areas.

Variables investors need to track next focus on three points: the duration of Qatar’s Ras Laffan shutdown, whether Asia continues “bidding up to grab cargo” in spot replenishment and squeezes Europe, and how fast increases in European natural gas prices are reflected in chemical price hikes and profit elasticity.

Risk Disclaimer and TermsThe market carries risks and investments need to be made carefully. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions herein fit their particular situation. Investments made accordingly are at one’s own risk. ```