The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. — Ed.
With natural gas prices stabilizing, the city gas price hike burden is projected to ease.
EU energy market for second week of March
Over Mar 5~11, the EU’s power generation shrank 1.9% w-w to 51.5TWh. Its power mix consisted of nuclear 22.1% (-0.8%p w-w), coal 15.6% (-0.8%p w-w), gas 16.8% (-2.7%p w-w), wind power 19.9% (+3.9%p w-w), solar power 4.5% (+1.5%p w-w), hydro 11.9% (+1.5%p w-w), and other 9.2% (+0.3%p w-w).
As of the ninth week of 2023 (Mar 1~7), the EU’s natural gas imports fell 20% y-y but rose 7% w-w. By region, North America, Africa, and the Middle East accounted for 44%, Norway 29%, Algeria 8%, the UK 5%, and Russia 9%. Natural gas inventory in the EU stood at 65.6bn m3, more than double the amount in the same period in 2022 (30.3bn m3).
Energy source prices for the week
As of Mar 13, energy source prices stood at: WTI US$74.8/bbl (-7.0% w-w), NewCastle US$182.9/ton (+0.6% w-w), Northeast Asia natural gas (Japan/Korea Marker) US$14.25/MMBtu (-0.3% w-w), European natural gas (Dutch TTF) US$15.62 (+18.1% w-w), and US natural gas (Henry Hub) US$2.61/MMBtu (+1.3% w-w).
City gas price hike burden to ease in 2H23
In Korea, the natural gas import price is determined by international oil prices and JKM. In 2022, the level of natural gas import price increase outpaced that of oil prices due to a surge in JKM. However, in 2023, JKM has remained at a stable level thanks to the unusually warm winter weather. In line, as long as there are no major political events such as a war, the LNG import price is projected to decline 24% h-h in 2H23 (based on the following assumption: average oil price of US$80bbl, JKM of US$19/MMBtu, and W1,317/dollar).
In March, city gas price for households and commercial use stands at W15.63/MJ, a figure that is lower by over 50% compared to general generation-purpose fuel cost (W32.60/MJ). But, with average fuel cost expected to narrow to W20/MJ for 2H23, a 30% hike in city gas price for residential and commercial use should level the cost and the selling price. That said, a hike in settlement cost for accrued accounts receivable also looks necessary.
