While the coronavirus-led plunge in crude oil prices has grabbed the bulk of the headlines, the collapse in spot liquefied natural gas (LNG) prices in Asia has been just as dramatic, and just as likely to have lasting consequences.

FILE PHOTO: Liquified natural gas (LNG) storage tanks are seen at PetroChina's receiving terminal in Dalian, Liaoning province, China July 16, 2018. REUTERS/Aizhu Chen

Spot LNG prices for delivery to North Asia slipped to $1.95 per million British thermal units (mmBtu) in the week ended April 24 - the lowest on record and also the first time they have closed below the $2 mark.

That means a slump of 71.3% since their pre-winter peak of $6.80 per mmBtu in October last year, worse than the 70.1% fall in Brent crude oil futures from their Jan. 8 peak this year - $71.75 a barrel - to the April 24 close of $21.44.

One of the almost bizarre consequences of the decline in Asian spot LNG prices is that they are now almost as low as natural gas futures in the United States.

This may to some extent be comparing apples with oranges, but it does serve to underline that the first casualty of the weakness in LNG will be U.S. exports to Asia.

U.S. natural gas closed at $1.75 per mmBtu on April 24, above recent lows around $1.50 but also well below the $2.91 peak reached just ahead of the northern hemisphere winter on Nov. 5.

The U.S. price is for delivery to the Henry Hub pipeline in the state of Louisiana, and thus is quite different to spot Asian LNG prices.

The most obvious difference is U.S. natural gas excludes to cost of transport to a liquefaction plant, the process of liquefaction and the shipping from the U.S. Gulf coast to Asia.

Liquefaction costs around $3 per mmBtu, and the shipping from the U.S. Gulf coast to Asia currently varies from around 60 cents to Japan and 81 cents to China, according to commodity price reporting agency Argus.

This puts the current break even price of U.S. LNG delivered to China at around $5.56 per mmBtu - a long way above the prevailing spot rates.

Of course, current spot prices are also well below the break-even point for much of the LNG delivered to Asia by the world’s top exporter Australia, and other Asian suppliers such as Malaysia and Indonesia.

But the point is that while cargoes from Australia will still incur a loss at current spot rates, it will be smaller than the amount a U.S. exporter is losing.

Most Australian LNG projects are likely to need a price of around $3 per mmBtu to break even, with the coal seam gas-based ventures in Queensland are believed to need slightly higher prices.

However, given the high costs of idling and then restarting LNG liquefaction plants, it’s likely that Australian operators will be reluctant to shut down, even if they are making a loss.

While U.S. LNG plants also face costs if they close down, given the scale of the losses they face, the fact that some of them are tolling plants without contracted buyers means they have more flexibility than rivals like Australia and Qatar, the world’s second-largest producer.

LNG SOLDIERS ON WHILE CRUDE CUTS

Unlike crude oil, where exporters such as OPEC and its allies have agreed to cut output, and other producers are being forced by low prices to curb theirs, it’s likely LNG supply volumes will hold up, apart from the loss of some U.S. production.

The problem for LNG is not just the current structural oversupply following the commissioning of eight new Australian projects and several more in the United States. It’s also the hit to demand from the new coronavirus pandemic, which has led to lockdowns and crimped economic activity across much of the globe.

Vessel-tracking and port data compiled by Refinitiv show that top importer Japan is expected to offload 5.13 million tonnes of the super-chilled fuel this month, which is the lowest monthly total in records stretching back to January 2013, and down 7.9% from the same month in 2019.

China has boosted its intake in April to an expected 5.84 million tonnes, up from 4.15 million in the same month last year, but this strength came after a soft start to the year by the world’s second-biggest importer.

It’s worth noting that China’s economy was the first to be hit by the coronavirus, which emerged in December in the city of Wuhan, and is also the first to try to return to normal after containing the outbreak.

South Korea, which has had more success than many countries in controlling the coronavirus, is seeing steady LNG imports, with April’s expected 3.44 million tonnes in line with the 3.45 million shipped for the same month in 2019.

Eventually, it’s likely that LNG demand in Asia will recover, but there is still likely to be an overhang of supplies for an extended period.

In theory this should encourage more coal-to-LNG switching in countries that can do this, such as Japan and South Korea.

It should also hurt the longer-term outlook for thermal coal, which is increasingly struggling on a cost basis against LNG and renewables, and that doesn’t include the cost of coal’s higher carbon emissions.

But the main impact from the coronavirus is likely to be the deferment of final investment decisions on a slew of proposed LNG plants, with projects in the United States and Australia particularly vulnerable to delays - or even cancellations.