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China's ramping up of tariffs on US LNG means nothing, everything - Russell

Gasoil News - Published on Fri, 17 May 2019

Image Source: Zawya
Reuters reported that China's decision to hike import duties on US LNG is a move that means very little for the market in the short term, but it has the potential to deliver outsized consequences the longer the levies remain in place. As part of its latest round of retaliatory tariffs on US imports, Beijing increased the duty on LNG shipments from 10 percent to 25 percent. This will make it even more uneconomic for Chinese buyers to purchase LNG cargoes from the United States. The 10 percent tariff put in place last year has already devastated the trade, with China's imports of the fuel dropping sharply.

According to vessel-tracking data compiled by Refintiv, China imported 25 US LNG cargoes in the first half of 2018, and this slipped to just eight in the second half. This year, a mere three cargoes have been delivered, one each in January, February and March, and no more are currently scheduled to arrive in the coming months. This means in practical terms that raising China's import duty will have little impact on global LNG flows. But there are certain to be longer-term consequences from the fastest-growing LNG market effectively locking out the world's fastest-growing supplier.

Much of the new LNG coming on stream this year and next is based in the United States, as companies rush to take advantage of the plentiful and cheap supplies of natural gas delivered by the nation's shale boom.

It's also worth noting that the United States is the dominant player in the next wave of LNG projects being planned around the world.

Currently, the United States has 64.2 million tonnes of annual LNG capacity under construction, the bulk of which will hit the market this year and next. Together with Canada, it also has a further 164.2 million tonnes in capacity for which the final investment decisions are due by the end of next year.

The market expectation is that China will overtake Japan as the world's largest LNG importer sometime in the next decade, even though its annual rate of growth will moderate from the breakneck pace of more than 40 percent for the past two years.

Meanwhile, this means China will become the most important single player in the LNG buyers' market, just as it already is for several other commodities, such as iron ore, copper, crude oil and coal.

Source :

Posted By : Rabi Wangkhem on Fri, 17 May 2019
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