ArcelorMittal pays $32.63/mmbtu for spot LNG

Vol 24, PW 26 (18 Nov 21) Midstream, Downstream, Renewables

Steel baron Lakshmi Mittal is a man of expensive tastes.

Who can forget when in 2004, the billionaire promoter of steelmaker ArcelorMittal Nippon Steel (AMNS) spent $34m on his daughter's wedding? Hardly surprising then that AMNS, which runs a 9.6m t/y steel mill at Hazira, formerly owned by Essar, has paid one of the highest prices in India, if not the highest ever, for a spot LNG cargo. On October 29 (2021), AMNS sourced a 139,853-cubic metre cargo from Nigeria LNG through Shell at Hazira for an all-time high of $32.63/mmbtu.

LNG sector veterans can't recall anyone in India ever paying more. A source remembers how Essar had shocked many in 2008 by sourcing a Shell cargo at $22/mmbtu, considered astronomical at the time.

Not just AMNS but GSPC and IndianOil too are also willing to pay high prices. On October 30 (2021), GSPC landed an Adnoc LNG cargo at Dahej through Vitol, paying $31.78/mmbtu.

Much of this expensive R-LNG went to 4200 factories through its city gas retail arm Gujarat Gas. Similarly, on October 25 (2021), IOC paid $25.50/mmbtu for a 142,637 cubic metre spot LNG cargo from Oman LNG through Glencore discharged at Ennore.

"IOC needs R-LNG both for its 11 refineries and also for city gas areas it operates with GAIL and Adani-Total Gas," says an IOC source. Earlier on October 7 (2021), AMNS and IOC sourced a cargo from Sabine Pass at Dahej, paying $19.01/mmbtu for the 161,782-cubic metre cargo through SITME and Socar Trading.

A day earlier, on October 6 (2021), AMNS landed a Qatargas spot cargo at Hazira. AMNS sourced the comparatively oversized cargo at 181,142-cubic metres through SITME at $18.49/mmbtu.

Both prices are seemingly reasonable in today's conditions. Meanwhile, Indian buyers remain envious of long-term contract cargoes, vastly cheaper than equivalent spot cargo rates.

"In South Korea and Japan, almost 80% of LNG is term LNG," adds a source. "In India, more than 40% of our LNG is spot LNG."

Importers are watching to see how the winter turns out. "Whether the ongoing price rally continues, intensifies or starts to weaken will depend on how severe the winter will be," adds another source.

"A cold winter will further increase prices."