Chinese LNG buyers resell US shipments as tariffs bite
As tit-fortat tariffs increase import costs, Chinese buyers are reselling U.S.-sourced LNG cargoes. This trend will accelerate this month as new multiyear supply agreements kick in and domestic demand is expected to weaken, traders and analysts report.
Beijing, which had imposed 15% tariffs for U.S. imports of LNG in early February, imposed reciprocal tariffs beginning on April 10 on all U.S. products, matching the move by U.S. president Donald Trump to impose 34% more tariffs on Chinese items.
Data from Kpler & LSEG shows that China, which is the largest purchaser of liquefied gas in the world, imported no U.S. LNG during March. According to Chinese customs, the U.S. supplied about 5% (or a little more) of China's LNG in 2013.
Alex Siow, an analyst at ICIS, said that Chinese LNG importers are likely to shift their thinking from 'We should try to resell U.S. LNG to Europe' to "We must resell all U.S. LNG" due to the large difference in tariffs.
Laura Page, the head of Kpler LNG insights, stated that Chinese LNG offtakers have already resold to Europe 70% of the total amount they will resell in 2024.
She added that a big increase in resales was expected once the Calcasieu Pass project of U.S.-based Venture Global began commercial operations. The arbitrage for moving cargoes between markets favoured Europe this summer over Asia.
According to two sources in the industry, China's state-owned Sinopec will begin buying 1 million metric tonnes of LNG per year from Venture Global this month. Sinopec has sold its April cargoes.
Sources added that CNOOC, a second state-owned firm, will also begin a contract with Venture Global in April to supply 0.5 million tonnes of coal annually for a period of five years.
CNOOC Sinopec Venture Global have not responded to our requests for comment.
ICIS' Siow stated that Sinochem Group, Foran Energy Group, and the state-owned PetroChina had diverted their U.S. LNG cargoes.
As Beijing's tariffs have made sales to China impossible, four Chinese traders claim that buyers of U.S. Liquefied Natural Gas (LNG) are placing their cargoes on European or Asian markets.
A trader at a state-owned company said that imports had stopped following the 15% retaliatory tariff. He added that the new tariffs would make them even less appealing.
The trader stated that most of his FOB supplies were sent to Europe as these markets are closer to the U.S., and the current prices make the arbitrage more advantageous. He was referring to the term "free-on-board" contract, which allows buyers to resell their cargoes.
As Asian prices fall, Chinese buyers are also experiencing a weakening of demand.
Customs data shows that China imported 4.5 millions metric tons LNG in February. This is the lowest monthly volume since April 2022.
A second Chinese LNG trader said that any delivery price over the low $10s per million British Thermal Units (mmBtu), is considered unsafe and likely to result in a loss.
Another trader stated that China's Tier-two LNG buyers - mostly city gas distributors - were willing to pay between $8 and $9/mmBtu as spot prices for imports.
(source: Reuters)
