SHANGHAI: China is set to introduce domestic, yuan-denominated liquefied natural gas (LNG) futures as soon as next month, sources familiar with the matter said, a move that could reduce Chinese importers’ reliance on Western pricing benchmarks.
The contracts will be listed on the Shanghai Futures Exchange (ShFE), the sources said, declining to be named as they were not authorised to speak publicly. ShFE and the China Securities Regulatory Commission did not respond to requests for comment.
The exchange has long sought to boost its global profile by offering internationally accessible contracts and challenging the dominance of Western benchmarks in commodities such as LNG and nickel. The new futures aim to reduce the need for Chinese firms to price physical LNG contracts using overseas indices, while encouraging foreign participation in China’s markets.
The launch comes amid heightened volatility caused by U.S. trade policies, with local-currency price management seen as enhancing China’s energy security.
China’s LNG imports fell last year due to U.S. tariffs, weak industrial demand and strong domestic gas supply. However, rising global LNG output this year is expected to ease supply constraints that have persisted since Russia’s invasion of Ukraine in 2022.
As a result, China’s LNG imports are forecast to rise 12% to 76.5 million metric tons this year, according to Rystad Energy analyst Ole Dramdal.
Despite being the world’s largest buyer of many commodities, China largely relies on foreign markets for price discovery. Yuan-denominated LNG futures could help shift influence toward domestic pricing and support the broader use of the yuan in commodity trade.
The move aligns with growing views that U.S. policy shifts are accelerating a move toward a multipolar trading system, weakening the dollar’s dominance.
China also plans to develop financial products linked to the contracts, including LNG-linked loans and asset-backed securities, helping to build a domestic LNG financial ecosystem.
Global energy firms, traders and exporters with exposure to China are expected to participate, analysts said, though foreign companies would need China-based trading entities to access the market.
“China needs a benchmark that reflects its own demand and supply,” said a state gas trader involved in the discussions, adding that future long-term LNG contracts could increasingly reference Shanghai prices.
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