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LNG truck sales impacting Chinese road diesel demand
GlobeNewswire 2024-07-26

China's sales of heavy-duty trucks powered by liquefied natural gas (LNG) rose from below 10% to reach as much as 30% of the market in the latter months of 2023 resulting in the displacement of over 8% of road diesel demand in the country according to a report by Wood Mackenzie.

China road diesel/gasoil demand displacement

The report: ‘The threat to diesel from LNG trucking in China', states that around 220,000 barrels a day of road diesel demand has been replaced by LNG as end-users take advantage of a number of favourable conditions for switching to LNG-fuelled vehicles. 

“China has been implementing various policies to promote LNG trucks and restrict diesel trucks as part of its efforts to reduce air pollution and lower carbon emissions, including encouraging re-fuelling infrastructure,” says Shiqing Xia, Consultant for Oils and Chemicals at Wood Mackenzie. “Low natural gas prices have also helped in making the switch to LNG-powered vehicles more attractive.”

The report adds that heavy-duty trucks account for over a quarter of the commercial vehicle fleet in China, reaching 8.76 million vehicles by 2023. The number of diesel trucks peaked in 2021 and has been declining thereafter, resulting in LNG's share of the heavy trucking fleet to increase to over 9% by 2024.

The report adds that heavy-duty trucks account for over a quarter of the commercial vehicle fleet in China, reaching 8.76 million vehicles by 2023. The number of diesel trucks peaked in 2021 and has been declining thereafter, resulting in LNG's share of the heavy trucking fleet to increase to over 9% by 2024.

“LNG trucks are suitable for inter-city medium and long-distance freight transport and are becoming increasingly favoured in China when assessing alternatives to diesel in the cargo logistics industry for medium and heavy trucks,” Xia says.

Xia adds that as a cleaner fuel, natural gas heavy-duty trucks have several advantages compared to diesel, including lower ambient emissions related to sulphur and particulate emissions, which can also improve the engine life and performance.

The report states that favourable pricing conditions for natural gas compared to diesel has bolstered sales of LNG vehicles. Since 2023, the price spread between LNG and diesel has widened, as natural gas prices fell while diesel prices increased due to global crude pricing.

The report concludes that the surge in LNG trucks will not last and will ease by the end of the decade. As battery technologies advance, electric vehicles are expected to displace LNG as the main threat to diesel in the long term.

This trend is borne out by diesel demand for road transport expected to fall from 2.3 million b/d in 2023 to 0.7 b/d by 2025.

 “LNG-powered trucks are gaining in popularity, but should only be seen as a bridging solution,” Xia concludes. “Investment in electric or hydrogen fuel cell trucks to respond to future market demands will not only help to meet environmental requirements, but could also give companies a long-term competitive advantage”