Japan's power demand is shrinking despite economic recovery

Total electricity supply in 2013 by Japanese 10 major utility companies fell 1.9% on year to 917 billion kilowatt-hour, according to the Federation of Electric Power Companies. It was the third consecutive year-on-year decrease. Last year's Japanese electricity demand was even lower than 2009 when economy recession following the Lehman shock significantly depressed the country's power consumption.

Japan's monthly industrial production index have increased by about 5% from a year ago since September 2012, however, the country's electricity demand has sunk by about 1% on year during the same period. Japanese electricity demand continues to shrink even in the economic recovery period, since users are trying to improve efficiency and optimization.

On the other hand, use of liquefied natural gas for thermal power in Japan is increasing because all nuclear units have been shut again since October 2013. Although higher coal-burning and weaker electricity demand had cut the nation's LNG consumption for thermal power by 4.0% on year in the first half of 2013, the recovery in the second half eased the decrease to 0.9% on year for the full year of 2013. Moreover, LNG consumption by Japanese power companies reached the record high at 5.27 million tonnes in December 2013.

Meanwhile, petroleum consumption by power companies in 2013 slipped 22.8% from a year ago to 413,000 barrels per day. Power firms seems to try reduce utilization rates of aging petroleum-burning thermal power units.

LNG prices in Japan are not reasonable compared to coal and petroleum. International coal prices have decreased since early 2011, while current Asian LNG prices are even higher than the price rally in 2008 because of the steady demand from Japan.

Chinese power companies enjoyed record profits thanks to weaker coal prices in 2013. Meanwhile, strong LNG prices have hurt Japanese power companies profit structures and are pushing up regional electricity prices.

Japanese power firms are trying to improve thermal efficiency of power units in order to reduce LNG consumption. Nevertheless, Asian LNG prices are unlikely to start declining until massive supply from the north America will begin in late 2010s.

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