Without Qatar's LNG—Opportunity for Chinese chemicals, risk for Asian power

Qatar has shut down its Ras Laffan liquefied natural gas (LNG) plant, which has an annual capacity of 77 million tons, plunging the global natural gas market into a highly tense state. This event not only caused European natural gas prices (TTF) to surge by more than 50% within just a few days, but also profoundly reshaped the supply and demand landscape of the global energy and chemical industries.

On March 7, according to Zhuifeng Trading Desk, citing the latest research from HSBC, HSBC Qianhai, and Morgan Stanley, this event is restructuring the global LNG supply and demand landscape, while also creating sharply different industry outcomes within Asia:

For Asia's power industry, which is highly dependent on Middle Eastern LNG, the threat of a supply shortage is imminent; while for China’s chemical industry, which is sensitive to European gas prices, European competitors’ sharply increased costs may open a rare window for structural opportunities for domestic companies.

According to HSBC Global Investment Research’s latest report, QatarEnergy announced on March 2 that it would halt LNG production at Ras Laffan and declared force majeure. The facility has an annual capacity of 77 million tons, accounting for about 20% of global LNG supply. Including about two weeks for restart, assuming a four-week shutdown, the market could lose at least 8 million tons of LNG, nearly 2% of annual supply.

Against this backdrop, European TTF gas prices soared about 70% in just two trading days, while Asia’s JKM prices also rose about 50%, both hitting three-year highs.

HSBC Qianhai Securities stated that the surge in European gas prices has pushed up the production costs of local chemical firms, presenting structural market share expansion opportunities and product premium space for China’s chemical industry (especially in MDI, TDI, vitamins, and methionine).

Additionally, HSBC analysts clearly distinguish the nature of risks between Europe and Asia: Europe faces a price issue, not a physical availability issue; Asia faces precisely the opposite—whether supply can be physically secured. Morgan Stanley Asia-Pacific research also notes that Asia’s power industry relies on Middle Eastern LNG for about 20%, with continuity of supply for data centers and power grids now facing real challenges, possibly forcing a shift to coal and other substitutes.

Qatar LNG supply halt: the ‘black swan’ of the global natural gas market

QatarEnergy announced closure of its Ras Laffan LNG plant and declared force majeure, cutting off nearly 20% of global LNG supply. Ras Laffan is the world's largest LNG export facility, with export volume reaching 82 million tons in 2025.

HSBC states the closure wasn’t simply caused by the blockade of the Strait of Hormuz; due to inability to export cargo, the on-site storage tanks (only about 1 million tons, less than five days of normal loading) quickly filled, forcing QatarEnergy to shut production.

This is crucial: The market faces not only shipping interruption due to the strait’s blockage, but also the time lost in restarting such a large, complex facility.

HSBC’s report notes, If there is no major infrastructure damage, it is possible to restore 40%-50% capacity within about a week after restart, reaching full output in two weeks; but if hardware is damaged or regional instability persists, the required time will lengthen further. Reuters cited some estimates saying restart itself takes two weeks, reaching full output takes another two weeks.

In terms of supply loss magnitude, HSBC estimates: a one-month shutdown would lose about 6.8 million tons, three months about 20.5 million tons, six months up to 41.1 million tons, equivalent to 1.5%, 4.6%, and 9.3% of global LNG yearly trade volume in 2025, respectively.

HSBC points out, considering Trump’s earlier estimates of a war with Iran lasting “four to five weeks,” plus a two-week restart window, the mainstream scenario for supply loss already exceeds 8 million tons.

This news triggered extreme market volatility. European benchmark gas prices (TTF) surged 50% upon the news, breaking $16 per million British thermal units (mBtu), then cumulatively rising about 70% in two trading days, reaching a three-year high. Asian spot LNG prices (JKM) also rose about 50%.

It is noteworthy that there is almost no spare capacity left in the global LNG market. The U.S., as the world’s largest LNG exporter, is estimated to have only about 5% spare capacity (about 6 million tons). Norway’s energy minister said the country’s gas producers are running close to full load. Australia, Asia’s largest LNG supplier, also has limited spare capacity.

For Europe, although direct dependence on Qatari LNG has dropped to 4% (mainly thanks to increased U.S. LNG imports), with current gas inventory only at 30% —forecast to fall to 26% by the end of winter—Europe will face fierce competition with Asia during summer restocking. Europe faces mainly a “price issue”—having to pay higher premiums to attract LNG cargo from the Atlantic basin.

For Asia, the issue is fatal “physical availability.” In 2025, 26% of Asia’s LNG imports come from Qatar and UAE. Countries like Pakistan and Bangladesh, highly reliant on Qatari LNG for power generation, face extremely high supply interruption risks.

China chemical industry’s opportunity: market share expansion amid high European costs

The supply halt of Qatari LNG has caused European gas prices to surge, directly impacting the cost structure of the European chemical industry.

According to HSBC Qianhai Securities analysis, vitamins, methionine, and polyurethanes (MDI/TDI) are the most sensitive segments to the rise in European gas prices. Europe holds a major position in global production capacity for these high-margin chemicals.

As European producers face cost pressure, China’s chemical companies are seeing significant competitive advantages. Amid geopolitical tensions, producers have started price increases, and distributors are increasing inventories of MDI/TDI and feed additives to hedge against price hikes.

Profit sensitivity and structural expansion Although European gas price levels have not yet caused large-scale production shutdowns, event-driven pricing mechanisms are meeting structurally loose supply-demand patterns. For Chinese chemical firms, product price increases directly translate into higher profits.

The report points out, for example in methionine, if prices rise by 5,000 yuan/ton to 25,000 yuan/ton from the base assumption, related companies’ earnings per share may increase by about 29%.

In the polyurethane field, every 1,000 yuan/ton increase in the polymeric MDI price spread is expected to boost the earnings of related companies by about 15%; for pure MDI and TDI spreads, the increase is expected to be about 7% and 9%, respectively. This high profit margin is expected to support Chinese chemical companies’ structural supply expansion in these areas.

Risks for Asia’s power sector: fuel shortages and rising costs

Morgan Stanley’s report points out that Asia’s power and gas industries rely on Middle Eastern LNG for about 20%. Force majeure supply disruption from Qatar LNG poses severe challenges to Asia's data centers and power grids.

The report notes that India and Thailand have the highest exposure to spot LNG risks among Asian countries.

About one-sixth of India’s gas demand comes from the Strait of Hormuz;11% of Thailand’s Gulf Development gas supply comes from the Strait of Hormuz, with net exposure at 6%.Philippines’ Manila Electric relies on Hormuz Strait LNG for up to 50% of its gas supply.In contrast, public utility companies in Malaysia and Indonesia are less affected by fuel availability.Japan and South Korea have 11% and 20% of their LNG imports from the Middle East, mainly for power generation, and Japan can use its LNG reserves to ease short-term shocks.

Morgan Stanley states that widening spark spreads and coal replacing LNG price rises have directly enlarged power market spark spreads, especially in commercialized power markets like the Philippines and Singapore, where efficient operators see significant increases in power spreads.

Facing uncertain LNG supply and high prices, coal once again becomes a key alternative fuel to ensure uninterrupted power supply.

Morgan Stanley research shows that, assuming LNG delivered at $15/mBtu, combined-cycle gas power costs far exceed coal power, and coal's relative advantage will accelerate such switching.

In South Asia, due to flexible available capacity and new coal-fired power plants being commissioned, gas-to-coal switching is accelerating. Significant price discounts for coal versus alternative fuels further drive this trend.

HSBC’s report also notes that incremental supply sources are limited in the short term, demand-side responses will become the main market balancing mechanism, with the most critical being switching from gas-fired to coal-fired power generation.

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