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After Dry Bulk and Tanker Markets, the US-China Trade War is Impacting LNG Shipping As Well

Despite more than positive predictions at the start of 2019, regarding the future prospects of the US LNG exports, unfortunately, Trump’s trade war with China has caught up, complicating things for US LNG exporters, who are now being forced to find other buyers. Last December, the EIA (US Energy Information Administration) carried a report, declaring that U.S. liquefied natural gas (LNG) export capacity will reach 8.9 billion cubic feet per day (Bcf/d) by the end of 2019, making it the third largest in the world behind Australia and Qatar. Currently, U.S. LNG export capacity stands at 3.6 Bcf/d, and it is expected to end the year at 4.9 Bcf/d as two new liquefaction units (called trains) become operational.

In a recent report, shipbroker Banchero Costa said that “the United States started exporting LNG from the lower 48 states in 2016 after the surge of natural gas production that followed the shale revolution and the development of new export capacity. In 2017 the U.S. was already a net exporter of natural gas ranking 6 th in the top exporting countries’ list following Qatar, Australia, Malaysia, Nigeria and Indonesia. In 2018 exports grew a staggering 53% and Indonesia and Nigeria were overtaken. Exports boomed towards South Korea (+91%, +118blncf), Latin America (+46%, +97blncf), Japan (+130%, 69blncf), Europe (+62%, +61blncf) and India (+176%, +37blncf)”.

According to the shipbroker, “in 2018 half of the U.S. LNG exports went to Asia followed by a 28% to Latin America, 15% to Europe, 5% to the Middle East and 1% to Africa. Of the 51% that ended up in Asia the largest share was taken by South Korea, followed by Japan, China and India. Exports to China, the world’s second largest and the fastest growing importer of the fuel, were 10% lower, – 10blncf and so far this year only 2 vessels went from U.S. to China compared to 14 in the same period in 2018 (please note the 10% tariff on LNG was imposed only in September 2018). Last Monday China announced it would boost the tariff on U.S. LNG imports from June to 25% from the current 10% in retaliation against the White House increasing tariffs on $200 billion worth of Chinese goods to 25% from 10% on Friday. The consensus is that the 25% tariff on U.S. LNG exports could halt the trade between the two countries”.

Banchero Costa said that “losing China as importer is likely to have an impact in final investment decisions for new export capacity in U.S. and could potentially slow the growth of its exports and favor those from Qatar, Australia, Russia and Mozambique to name a few. It appears there is little room for booming exports without China: European imports are largely supplied economically via pipeline from the Russia, Japan and South Korean imports are seen unlikely to be able to absorb a lot more gas given the planned restart of nuclear power plants. On the other hand seems clear that Chinese thirst for the superchilled fuel is not over, especially considering LNG as the cleaner alternative to coal to generate electricity. China will likely source a growing portion of LNG from other exporters, possibly displacing other importers that could turn to U.S. for their needs. As always prices will ultimately drive the development of the trades”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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