Wood Mackenzie: Growth in LNG supply running up against concerns over Chinese demand

Chinese LNG imports have dropped 18% in the first eight months of 2025 compared to the same period last year. This decline raises critical questions about the world's largest LNG market's capacity to absorb the wave of new supply coming online. US LNG export volumes set for sanction this year have already climbed higher, with more projects expected over the next 12 - 18 months. Each project taking final investment decision makes commercial sense individually, but collectively they risk pushing the market towards oversupply.

China's demand concerns grow louder

China has emerged as the world's largest LNG importer over two decades. The country remains the industry's primary hope for absorbing new supply. However, overall energy demand in China has disappointed this year, contributing to the 18% import decline.

Looking ahead, China's plan to construct the 60 GW Medog hydro project poses structural risks to longer-term LNG demand growth. Progress towards additional Russian pipeline gas imports and the country's massive wind and solar rollout compound these concerns. Wood Mackenzie expects these factors to limit China's ability to absorb the projected supply increases.

Geopolitics reshape market dynamics

The Trump administration's energy dominance push intensifies geopolitical pressures across global gas markets. US efforts to accelerate the complete shut-out of Russian gas and LNG from Europe create opportunities for US LNG suppliers. For an administration focused on lowering domestic prices, targeting Russian gas exports appears more palatable than crude oil sanctions that could spike prices.

Russia has responded with two high-profile moves: delivering Arctic LNG-2 cargoes to China and announcing a binding Power of Siberia 2 deal. Whether US LNG or Russian pipeline gas, heightened geopolitical uncertainty compounds existing supply concentration concerns. Wood Mackenzie views this uncertainty as a key risk factor for market stability.

Winners and losers emerge

New LNG market entrants are creating a bigger, more diverse and liquid market. Rapid change and increasing volatility will produce clear winners and losers across the value chain.

US LNG offtakers could face margin pressure in an oversupplied market. Most project developers remain insulated through infrastructure-style commercial frameworks and fee structures. European consumers stand to benefit most from softer prices after weathering Russian import losses. Asian buyers with firm demand can lock in long-term contracts at lower prices.

Abundant debt and equity financing underpins confidence in the US gas story. However, Gastech revealed early signs of financing scrutiny.

While debt finance appears secure, equity investors increasingly recognise potential margin compression from higher US gas prices and lower international spot prices.

Industry needs reality check

Wood Mackenzie's conversations in Milan highlighted emerging downside risks as oversupply concerns mount. The industry requires a measured approach to new investment decisions. This assessment aims to keep the industry prepared to deliver the next growth phase in an increasingly interconnected world, rather than bursting the LNG bubble. Read the full article here: Gastech 2025: when will the music stop for US LNG? | Wood Mackenzie

Read the article online at: https://www.worldpipelines.com/special-reports/23092025/wood-mackenzie-growth-in-lng-supply-running-up-against-concerns-over-chinese-demand/