China LNG Buyers Seek to Swap U.S. Cargoes After Fresh Tariffs

(Bloomberg) -- Liquefied natural gas buyers in China are seeking to swap their U.S. shipments for cargoes from other nations after Beijing pledged to raise tariffs amid a deepening trade dispute, according to traders with knowledge of the situation.

Some Chinese LNG buyers have approached suppliers about trading the U.S. cargoes, which they’ve already committed to buy, for shipments from non-tariff nations, said the people, who asked not to be identified as the information isn’t public. While China’s imports of American gas have dropped since it slapped a 10% duty on the fuel in September, pressure is mounting to completely avoid the cargoes after Beijing said Monday it would boost the tariff to 25% starting June 1.

China LNG Buyers Seek to Swap U.S. Cargoes After Fresh Tariffs

The trade war has derailed what should be a natural partnership, as the U.S. vies to become the world’s top exporter of LNG and China is on track to become the largest buyer. While cheap shale gas had helped U.S. exporters undercut other sellers that are nearer to China, the bigger tariff makes American LNG uncompetitive and has discouraged long-term partnerships.

China has imported four LNG cargoes from the U.S. so far this year, down about 80% from the same period last year, according to vessel tracking data. That compares with a 21% jump in total LNG imports during the first quarter.

China LNG Buyers Seek to Swap U.S. Cargoes After Fresh Tariffs

Almost all of China’s imports of U.S. LNG are received at terminals owned and operated by state giants China National Petroleum Corp., China National Offshore Oil Corp. and Sinopec Group. The companies are China’s biggest LNG buyers, and their terminals are also accessible to smaller independent buyers, including ENN Group and Beijing Gas Group.

CNPC, the parent company of PetroChina Co., is the only Chinese firm with a long-term off-take agreement from a U.S. project. CNOOC has a long-term contract with Total SA, which sources cargoes from the U.S.

None of the companies replied to requests for comment.

©2019 Bloomberg L.P.