According to the latest Reuters report, there is unlikely to be a surge in Chinese demand for US LNG while tariffs remain in place, despite the signing of a new energy purchasing agreement.
Under a Phase 1 trade deal, over the next two years, China has reportedly committed to purchasing US$52.4 billion worth of additional US energy supplies (including LNG). This deal has been agreed while a 25% Chinese tariff on US LNG is in place. The tariff in question will reportedly remain in effect until the two country’s respective governments agree a Phase 2 trade deal.
Over the next two years, China’s LNG demand is forecast to total approximately 15 – 25 million tpy. While the US is an obvious partner to meet this demand, according to analysts, the current tariffs are apparently proving to be a significant hurdle to, what Jenny Yang (Director of IHS Markit’s greater China Gas, Power, and Energy Future division) terms as, ‘meaningful’ trading of the commodity between the two countries.
According to Wood Mackenzie’s Thompson, if China began importing larger quantities of LNG, the cost of the tariffs would need to be absorbed by the importing companies, and/or subsequently their customers. Unsurprisingly, this is not an appealing prospect for Chinese state oil companies.
In light of this, Reuters has reportedly been told by Chinese traders that they will be taking a ‘wait and see’ approach, rather than pursue commitments to large scale deals in the near future.
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/20012020/chinese-demand-surge-for-us-lng-unlikely-under-tariffs/