Gas crisis puts LNG cargo trade concentrated in major traders’ hands

Increasing LNG cargo prices have squeezed out dozens of smaller traders, concentrating the business in the hands of a handful of international energy majors and top global trading houses.

This grip is not expected to ease until 2026 when more liquefied natural gas (LNG) starts to materialise and lower prices, adding to supply worries for poorer states reliant on it to generate power and driving up costs for big Asia economies.

The global LNG market has more than doubled in size since 2011, ushering in dozens of new entrants and the expansion of smaller players in Asia. In recent years, smaller traders accounted for 20% of LNG imports in China alone.

But a spike in spot LNG cargo prices to $175-$200 million, from around $15-$20 million two years ago, has had a seismic impact on physical trading activity for many smaller players.

The capital needed to trade the market soared after benchmark LNG prices rose from record lows below $2 per million British thermal units (mmBtu) in 2020 to highs of $57 in August.

In July, Japan’s Nippon Steel Corp, the world’s second-largest steelmaker (5401.T), purchased an LNG shipment at $41/mmBtu. LNG spot prices price stood at $40.50/mmBtu then.

Short term market volatility has heightened risk for traders, with geopolitics rather than fundamentals driving price moves.

Conditions are now heavily skewed in favour of players with large, diversified portfolios and strong balance sheets like oil majors Shell (SHEL.L), BP (BP.L) and TotalEnergies along with major trading houses including Vitol, Trafigura, Gunvor, and Glencore (GLEN.L).

Both have built portfolios, with Shell buying BG and TotalEnergies taking on Engie’s LNG arm. Both are also partners in Qatar’s North Field, one of the biggest LNG projects.