LAUNCESTON, Australia, March 15 (Reuters) – The decline in the spot price of liquefied natural gas (LNG) in Asia to a 21-month low is tempting China to boost its imports of the super-chilled fuel.

China is on track to import 5.39 million tonnes of LNG in March, according to data compiled by commodity analysts Kpler.

This would be up from February’s 4.96 million tonnes and also above the 4.77 million from March last year.

China lost its crown as the world’s biggest LNG importer last year to former champion Japan, as high prices led Chinese utilities to sharply reduce spot purchases and only take cargoes bought under long-term, mainly crude-oil linked contracts.

But the spot price in Asia has been trending lower since mid-December and ended at $13.50 per million British thermal units (mmBtu) in the week to March 10.

This is down 64% from the northern winter peak of $38 per mmBtu reached in the week to Dec. 16, and also 81% below the record high of $70.50, hit in late August.

Spot LNG prices soared last year in the wake of Russia’s invasion of Ukraine as European buyers sought large volumes in an effort to replace Russian pipeline natural gas.

Europe’s imports surged to a record high of 13.44 million tonnes in December, but they have trended lower since then as the continent enjoyed a warmer than usual winter, which ensured adequate natural gas inventories amid lower consumption.

Europe’s LNG imports are forecast by Kpler at 11.24 million tonnes in March, which would be the lowest monthly total since October’s 10.11 million.

Despite China’s renewed interest in LNG, total imports for Asia are also trending lower, with Kpler forecasting March arrivals of 20.99 million tonnes.

This is down from 22.21 million in February and also below the 22.78 million from March last year.

JAPAN WEAKNESS

Much of the decline in Asia’s imports can be put down to Japan, which is due to receive 4.99 million tonnes of LNG in March, the lowest monthly total since May 2020.

South Korea, Asia’s third-biggest LNG buyer, is on track to import 4.08 million tonnes in March – which would be the weakest month since November – down from February’s 5.14 million.

Slightly offsetting the decline from Japan and South Korea is more cargoes going to India, Asia’s fourth-biggest LNG buyer, with arrivals of 1.59 million tonnes expected in March, the most since November.

Effectively, Asia’s LNG market has two current drivers, with cheaper spot prices encouraging buying in China, India and other price-sensitive importers such as Bangladesh.

The other driver is milder than usual temperatures, which has curbed LNG imports in Japan, South Korea and Taiwan.

Another factor to consider is Asia’s rising imports of thermal coal, which is used to generate electricity and thus competes with LNG.

Japan’s imports of thermal coal are expected to reach 12.05 million tonnes in March, up from 11.07 million in February, which would be the strongest monthly outcome since August.

South Korea’s thermal coal imports are forecast by Kpler at 8.24 million tonnes in March, up from 7.55 million in February, while Taiwan is on track to import 5.27 million, the most since July last year.

China is also buying more thermal coal from the seaborne market, with March imports estimated at 20.32 million tonnes, up from 18.63 million in February and 15.81 million in March last year.

Seaborne thermal coal prices have also been trending lower since hitting record highs in March 2022 in the wake of Russia’s invasion of Ukraine on Feb. 24 last year.

However, renewed buying interest is starting to lead prices higher, with Indonesian 4,200 kilocalorie per kg (kcal/kg) coal , as assessed by commodity price reporting agency Argus, ending last week at $73.84 a tonne, up from $72.43 the prior week.

Australian 5,500 kcal/kg coal at Newcastle port , a grade popular in India, also rose last week, ending at $121.18 a tonne, up from $117.95 the previous week.

Coal remains cheaper than spot LNG when used in a Japanese power plant, according to Refinitiv data, but if coal prices continue to recover and LNG keeps dropping, this situation may reverse in coming weeks.

The opinions expressed here are those of the author, a columnist for Reuters.