Korea's industrial stock of LNG relatively stable via preemptive move by companies

[Photo provided by POSCO Energy]

South Korean industrial sites could be relatively safe from the squeeze in liquefied natural gas (LNG) supplies that have been gone globally short after Russia cut off pipelines to Europe to protest the sanctions for its invasion of Ukraine thanks to preemptive moves by Korean traders.

POSCO International, the trade unit of the nation’s steel giant POSCO Group, managed to strike a 20-year contact for an annual supply of 400,000 tons with U.S.-based energy company Cheniere Energy in May before prices shot up. The company has been in charge of LNG fueling for the steel and chemical materials manufacturer since 2018.

“Because the terms of the purchase were decided before Russia invaded Ukraine, we are getting the supplies much more favorably than the current rates,” said a POSCO International official.

Cheniere Energy will supply POSCO International with 400,000 tons of LNG each year for 20 years beginning late 2026.

POSCO Group recently decided to merge POSCO International with its energy subsidiary POSCO Energy to strengthen its energy business and aims to up LNG trading volume by ninefold from 1.31 million tons of last year to 12 million tons by 2030.

SK E&S, the energy firm under SK Group, also inked an LNG deal with Singapore’s global energy trading company Trafigura. The price and the duration of the contract, however, were not disclosed.

State utility Korea Gas Corporation monopolized natural gas supply for 40 years, but the share of direct import by companies has risen to 20 percent as POSCO began direct imports from 2005 and more companies followed suit.

“The increase in private-sector import can help market stability due to diversification of the import period,” said one official at a generating company.

According to the World Bank, the natural gas index more than tripled to 343.27 in July from 112.68 a year ago, the highest since 1977. Prices of natural gas are likely to continue rising as Australia, the world’s biggest exporter of LNG, is considering curbing LNG exports.

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