News and Articles

Scepticism regarding the recovery of EU's industrial gas demand to levels seen before 2022 is prevalent among various market gurus. While there has been a slight uptick in demand this year, it still lags behind the figures prior to Russia's actions in Ukraine. Estimates from a trading entity suggest a shortfall of around 8-10%, attributing it to subdued economic activity and soaring interest rates which have hampered investments and curtailed gas consumption. Another trader highlighted the low European purchasing managers' indexes as an indicator of the diminished industrial demand.

Request Access For the Latest Price Trends of LPG

Two industries in the EU, namely chemicals and refining, which are highly sensitive to price fluctuations, have faced challenges. While the chemical sector has grappled with the challenge of substituting gas as a primary feedstock, refineries have found it relatively easier to transition to LPG. This has resulted in reduced production in the chemical industry and a shift from gas to LPG in refineries.

The past couple of years have witnessed extreme price fluctuations, leading some industrial consumers to become wary of gas. A trader emphasized the unprecedented nature of these price swings in such a short timeframe. Moreover, the shift of several firms towards alternative fuel systems might have permanently reduced the demand for gas. An analyst pointed out that EU industries are in pursuit of stable, long-term attractive prices, which the EU currently doesn't provide. In contrast, Asian nations have been proactive in sealing new long-term LNG contracts, unlike the EU.

However, on a more optimistic note, an analyst suggested that the worst might be over for manufacturing stocks, anticipating a potential restocking phase soon. They hinted at a possible unexpected rise in industrial gas demand, although the volatility at the Netherlands' TTF hub remains a concern. If industrial consumers, who had previously locked in contracts at peak prices, manage to negotiate lower rates, it could boost gas demand. But those on older contracts might face steeper prices upon renewal, potentially offsetting any positive impact.

Analysts also believe that the cost dynamics suggest that for EU refiners, gas might be pricier compared to other fuels. Imported ammonia might also offer a more economical option than local production. Ultimately, the weather will play a pivotal role in shaping EU's gas demand this year. As one trading entity aptly put it, the majority of the outcome lies in the hands of nature. The upcoming winter season will be a decisive factor, with its implications on storage levels and subsequent gas prices.

According to the article by Procurement Resource, the EU's industrial gas demand landscape is marked by uncertainty and influenced by various factors, from geopolitical events to economic dynamics. While some industries adapt and shift towards alternative fuels, others grapple with challenges. The market's future hinges not only on economic and industrial strategies but also on unpredictable elements like weather patterns. As the winter season approaches, its impact will be keenly watched, potentially setting the tone for the EU's gas market in the subsequent months.