A softening in east coast gas prices in recent weeks has yet to bring down prices offered to manufacturers to levels they say are affordable, adding pressure to the federal government to slap restrictions on Queensland LNG exports for 2018.
Sources close to gas buyers say that while the $20-plus a gigajoule prices offered to shell-shocked manufacturers in February-March are no more, offers of $17-$18 a gigajoule for firm deliveries are still common, about triple the level of expiring contracts.
Those prices are still well above wholesale prices for Australian gas in key north Asian markets. That’s left manufacturers fuming and calling for Canberra to act as soon as possible to trigger the Domestic Gas Security Mechanism to cap exports and make more gas available in the eastern and southern states.
“The market does not look as apocalyptic as it did in February and March, but if we hadn’t gone through February and March we would be looking at the current prices and saying this is an apocalypse,” said Tennant Reed, national policy adviser at Australian Industry Group.
“As long as domestic prices remain significantly higher than what we would consider an international benchmark then we would see it as appropriate to trigger the ADGSM,” said Ben Eade, executive director at Manufacturing Australia, whose members include heavy energy users such as BlueScope Steel and Brickworks.
Spot gas markets have loosened to a point:
At $7.91Gj, they are close to Japanese prices for the same gas now:
But when you add liquifaction and shipping, to reach export net back where prices should be at worst, you still have to subtract $1.80Gj. Spot markets therefore remain in a state of discriminatory pricing.
In contracts, which represent 95% of volumes, nothing has changed:
The same Aussie gas is still half the price in Japan as it is here.
The gas crisis rolls on virtually unchanged as Do-nothing Malcolm sits on his hands (after declaring it a national emergency).
