LNG prices linked to coal are innovative, not game-changing

The problem is neither the oil link – the solution is not the coal link. The novelty is that the pricing of LNG starts to adapt to its market. In Japan and South Korea the competitor is coal. In other markets its other stuff and for LNG bunkering or LNG as a fuel, its oil again. In the end, portfolio players will give sellers what they need – longterm contracts and prices they can live with, and they will give buyers what they need – pricing indicators they can live with. They will sit in the middle and find a way to make money out of this. Producers can’t take risks on price or volume – they wont have the big winnings as well. They will be reliably paid for being reliable.

The linking of a liquefied natural gas (LNG) contract to the price of coal is a long-overdue step, but while intriguing it’s also unlikely to represent a major shift in the fast-evolving market for the super-chilled fuel.

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