China’s once-vibrant natural gas market is showing signs of slowing growth, as a weakening economy and more affordable energy options reduce the country’s appetite for the cleaner-burning fuel. While natural gas consumption had been experiencing double-digit percentage growth in recent years, the momentum is expected to diminish in 2025. Key factors include reduced industrial demand and a growing reliance on cheaper coal and renewable energy sources.
Government policies are contributing to this shift. Beijing’s transition program aimed at replacing coal with natural gas has lost steam. Additionally, some regions are implementing electricity price cuts to support local manufacturing, adding further pressure on natural gas consumption. Simultaneously, the country is expanding domestic production and importing more gas from Russia, which could spell trouble for the more expensive liquefied natural gas (LNG) shipped by tankers to China’s coastal terminals.
In 2024, gas imports to China rose nearly 10%, surpassing 130 million tons—an all-time high. However, the overall demand for LNG, which makes up nearly 60% of the country’s imported gas supply, has declined in recent months. LNG is primarily sourced from countries such as Australia and the United States, and its demand has been waning in the face of economic uncertainty.
China International Capital Corp. has revised its growth forecast for gas demand, predicting a slower rise in consumption this year. The bank expects apparent gas demand to increase by only 6.2% in 2025, a significant decrease from an estimated 9.4% growth in 2024. Similarly, Chinese consultancy Gastank anticipates a 6% growth rate in gas demand for the year.
Guangdong Province, one of China’s economic hubs, exemplifies these challenges. The province, which has seen rapid gas consumption growth, is now facing a dilemma. In response to an anticipated trade war with the United States, the local government is reducing electricity prices to support export-driven industries. Gastank’s Rita Huang suggests that energy costs in Guangdong could drop to approximately $7 per million British thermal units—about half the current price of LNG—putting further strain on the natural gas market.
Additionally, Guangdong is pioneering market-based electricity trading, giving consumers the flexibility to select their energy sources. According to JLC analyst Zhang Xiaotong, this shift is expected to discourage factories from increasing output and energy consumption amid a sluggish economy. As a result, manufacturers will likely prioritize the cheapest energy options, making LNG imports less attractive.
This growing preference for alternatives is challenging natural gas, especially LNG. Domestically produced gas, including coal bed methane, is becoming more popular, while China’s expanding coal, solar, wind, and nuclear power industries continue to increase their market share.
The outlook for China’s energy sector remains uncertain, with LNG facing rising competition from more affordable and diverse energy sources. As the country navigates economic difficulties and shifting energy policies, its demand for natural gas is set to face further headwinds.
Related topic:
How To Invest In Natural Gas Futures?
