Investigating the price linkage between the Asian LNG spot and East Asian LNG prices and its implications

This study investigates the price linkages among the Asian LNG spot and East Asian LNG prices to examine the existence of a long run relationship among the spot, Japanese, South Korean, Taiwanese, and Chinese LNG prices using co-integration analysis over the 2009-2014 period. The results show that the Asian LNG spot price did not have a price linkage with both monthly averages of Japanese and Taiwanese LNG prices. The analyses also indicated that the South Korean LNG market moved together with the Asian LNG spot market. Lastly, the study discovered that the Chinese LNG market was somewhat influenced by the dynamics of the Asian LNG spot market. The findings corroborate the International Energy Agency's views on the importance of creating a natural gas trading hub in Asia that reflects the dynamics of the gas market in the Asia Pacific Basin and making the Asian gas market to become more uniform.