The opinions expressed here are those of the author, a columnist for Reuters
Chinese buyers of US LNG could divert cargoes to Europe
China's share of US LNG offtake set to grow
Tit-for-tat tariffs could impact new US LNG projects
By Ron Bousso
LONDON, Feb 6 - The burgeoning trade war between the United States and China has caught American gas exporters in the crossfire as they face the prospect of losing their edge in the world's fastest-growing LNG market.
Buyers of U.S. fuel will likely respond by redirecting more supply to Europe, where gas prices are today stronger than in Asia, a short-term solution that could even benefit Chinese traders.
Beijing slapped a 15% tariff on imports of U.S. liquefied natural gas, after U.S. President Donald Trump announced last Saturday that he was placing a 10% charge on all Chinese imports.
This move will have minimal impact on China's energy markets, given that U.S. LNG represents only 5.5%, or 4.3 million metric tons, of its total LNG imports, according to Kpler data.
But the effect on U.S. gas exporters could be far greater if these tariffs prove durable.
Until recently, Asia, and China in particular, were considered key growth markets for the rapidly expanding U.S. LNG sector, which is expected to see supply double to around 200 million tons per year (mtpa) by 2028 from 100 mtpa currently, according to LSEG data.
China's share of U.S. LNG offtake is set to grow sharply. Chinese importers have committed to buying nearly 20 million metric tons per year from existing and new U.S. export terminals in contracts that often exceed 20 years, according to Reuters calculations.
Such long-term contracts are vital for U.S. companies seeking to secure financing for expensive LNG production facilities. A China-U.S. trade war would likely dampen Chinese companies' appetite to sign further supply contracts, casting doubt on the viability of the next wave of U.S. projects that would start towards the end of the decade.
President Trump once famously quipped that "trade wars are good and easy to win", but identifying any long-term winners here is likely to prove challenging.
Benchmark European and Asian LNG prices https://www.reuters.com/graphics/LNG-PRICES/zgvoaodlovd/chart.png
China's LNG imports https://www.reuters.com/graphics/CHINA-LNG/mopaweroopa/chart.png
(Writing by Ron Bousso; editing by David Evans)
((ron.bousso@thomsonreuters.com +447887626565))
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