The Chinese Government has announced a 10% tariff on US LNG, after the US imposed tariffs on $200bn worth of imports from China.
The 10% tariff on $60bn worth of US goods, which will come into effect on 24 September, is lower than the 25% previously threatened. It is nonetheless a blow to LNG producers in the country.
S&P Global Platts’ head of gas and power analytics Ira Joseph told the Wall Street Journal: “It’s a big deal for the US-China gas trade. The tariffs will push Chinese buyers to other sellers in Asia and the Middle East because the US will no longer be considered a low cost option. The US now can’t come in with lowball price deals.”
The latest tariff on US LNG weakens President Trump’s attempts to use shale oil and natural gas to turn the US into a global energy leader. Estimates showed the US was on track to export more than 1,000 billion cubic feet (bcf) of LNG in 2018, which is enough gas to fuel around 5 billion homes for a day.
This year, China is looking to buy less than 100bcf of LNG from the US, a significant reduction from 2017, when it bought 15% of all US LNG, according to US Department of Energy data.
China has taken LNG deliveries from just four vessels in the past three months, compared to 17 in the first five months of 2018. So far this year, the Chinese Government has imported 1.6 million tonnes (mt) of LNG from the US, which equates to 11% of US LNG exports. This is just 5% of China’s overall LNG imports.
A report from Wood Mackenzie found that China’s LNG imports are on the rise, and could increase from 38mt in 2017 to 52mt by the end of this year, representing a 45% growth.
Center for Liquefied Natural Gas executive director Charlie Riedl told Reuters that the tariff on LNG specifically “is a good indicator of how serious things have gotten between the US and China on this trade issue. While we would like to see this resolved quickly, I don’t see that happening right now.”
He added that the longer these trade disputes continue, the more likely financial brokers will be put off US LNG investments.