Race to China is on as fifth tanker carrying US LNG cargo said to be en route

A fifth tanker that loaded at a US liquefaction facility was said to be heading toward China on Wednesday, as tariff waivers appear to be encouraging more deliveries following a halt that has lasted a year.

The Greek-owned Maran Gas Vergina, which loaded at Freeport LNG, was scheduled to arrive in China around April 19, according to a market source with direct knowledge of the current plan.

The tanker, chartered to BP for a spot voyage, was in the North Pacific on Wednesday, S&P Global Platts Analytics vessel-tracking software cFlow showed. Based on its target arrival date, the tanker, assuming it doesn’t change its expected destination, could be the first US LNG export cargo to be delivered to China since March 2019.

Duties of 25% that were imposed by Beijing in retaliation for US tariffs on Chinese goods have made deliveries to China uneconomic, especially when factoring in weak Asian demand and low international prices exacerbated by the coronavirus pandemic.

But according to industry sources, Chinese companies that will be receiving the cargoes that are currently on the water heading to China were granted exemptions removing the duties from imported US LNG. Most businesses in China are resuming commercial operations and employees are returning to work this week, raising expectations of an uplift in downstream gas demand.

While the cargoes heading to China, the world’s second-largest LNG importer, are good news in the near term for US exporters, the demand picture elsewhere in Asia is not so bright.

The Platts Gulf Coast Marker, which tracks the value of a spot cargo loading from the US Gulf Coast, was assessed higher Wednesday at $1.60/MMBtu. This was on the back of strengthening LNG prices in Europe, which continue to be one of the key markets for US-sourced cargoes.

But the GCM has been trending below equivalent US Henry Hub futures since late March, implying that the margin between the market value of feedgas and a free-on-board cargo is likely to be very thin, if not negative, Platts Analytics data show. The Henry Hub futures price for May was last assessed at $1.852/MMBtu, more than 25 cents above the equivalent GCM value.

“Fundamentals are now starting to point in a bearish direction in Asia, especially outside of China,” said Jeffrey Moore, Platts Analytics manager for LNG in Asia, during a webinar Wednesday. “There simply is less demand available within Asia than what we expected at the beginning of the year. We are seeing this on a weather-normalized basis.”

He added, “It is our expectation that downward pressure will remain on spot prices because there is so much supply in the market.”

OTHER CARGOES
Besides the Maran Gas Vergina, the Naturgy-chartered Hoegh Giant, RWE-chartered Palu LNG and Cheniere-chartered Cool Explorer showed captain’s destinations in China as of Wednesday afternoon. The Total-chartered SK Resolute, which loaded at Cameron LNG in Louisiana, also was showing a destination of China, though its destination has changed multiple times, including at one point to Taiwan.

The Hoegh Giant and Cool Explorer loaded at Cheniere’s Sabine Pass export terminal in Louisiana, while the Palu LNG loaded at Cheniere’s export terminal near Corpus Christi, Texas, cFlow shows. Delivery dates for the five cargoes were set for between April 19 and May 5, according to cFlow.

Officials at the US terminals have declined to discuss details of customer deliveries. Sources at Guanghui Energy and ENN confirmed they had obtained tariff exemptions on US LNG cargoes shortly after submitting their applications. Chinese NOCs were also heard to have obtained these exemptions recently, market sources reported.
Source: Platts