China stopped buying US liquefied natural gas (LNG) for over 10 weeks, shipping data showed, as a 49% tariff on American gas makes purchases financially unfeasible. The shutdown is a grim escalation of the US-China trade war and a new low in bilateral energy cooperation, the Financial Times said.
The last cargo was on February 6 when a 69,000-tonne tanker shipped in from Corpus Christi, Texas, entered China's Fujian province. Another ship was diverted to Bangladesh days later as China first added a 15% tariff and then raised the tariff to 49% for US LNG.
The freeze in trade reflects a similar pause over Donald Trump's first term in office, although analysts caution now the effects could be more prolonged. Anne-Sophie Corbeau, of Columbia University's Center on Global Energy Policy, said it is unlikely that Chinese importers will sign on to new US LNG contracts. "There will be long-term consequences. I do not believe Chinese LNG importers will ever sign any new US LNG," she said.
Long-term deals in limbo as Russia moves in
While China once re-exported US LNG to Europe, the present freeze jeopardizes the sustainability of US export expansion plans. In 2021, the US provided 11% of China's LNG imports; last year, that fell to 6%.
Chinese energy majors such as PetroChina and Sinopec still have 13 long-term deals to purchase LNG from US terminals that stretch up to 2049. The deals have been crucial in paying for multi-billion-dollar infrastructure in the US and Mexico. Developers, however, now want to revisit some of those agreements because of inflation and tariff-related expenses.
Market analysts predict the standoff will continue. "There was a total hiatus last time until Chinese authorities issued waivers, but this is a different environment," said Kpler analyst Gillian Boccara, referring to slow Chinese growth and lower gas demand.
Meanwhile, Beijing is increasing energy relations with Moscow. Russia has become China's third-largest supplier of LNG after Australia and Qatar, and the two nations are negotiating the Power of Siberia 2 pipeline project. "We will certainly see more [Russian LNG] imports," Chinese ambassador to Russia Zhang Hanhui said.
Analysts predict that the tariffs will initiate wider trade flow shifts, with Europe potentially gaining from cheaper LNG prices. "With tariffs increasing to the point where they are an effective embargo, we will see a reshuffling of trade flows," said Energy Aspects' Richard Bronze.
As China turns to Russian gas, the US LNG industry's aspirations are put to a severe test—not only from tariffs, but from changing global alignments and weakening Asian demand.
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