Houston — No US LNG export cargoes were delivered to China in the second quarter, a plunge from nine during the same period a year earlier as the tariffs battle between Washington and Beijing escalated.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Shipments to Spain, France and Chile helped pick up the slack as the US saw a 55% increase in worldwide export deliveries during the three-month period that ended June 30, S&P Global Platts Analytics trade flow data showed Tuesday.
The shift in trade flows to Europe and South America reflects efforts by US exporters to look beyond Asia, the world's biggest importer and for a long time seen as key to developers' liquefaction capacity growth goals. Besides the trade tensions with China, volatile Asian prices also have contributed to the shift. Fewer US cargoes were delivered to South Korea in the April-June quarter versus a year earlier, Platts Analytics data showed.
There are currently four major US LNG export facilities operating along the Gulf and Atlantic coasts. Two more -- one in Texas and the other in Georgia -- are expected to start shipping cargoes later this year. Just Tuesday, Cheniere Energy said it produced its first commissioning cargo from its second liquefaction train at its terminal near Corpus Christi, Texas. Beyond the facilities operating now, about a dozen other terminals are actively being developed with proposals to go online in the early to mid-2020s.
The market dynamics and the prospects for the projects that have yet to start construction, however, have changed due to the US-China trade battle.
China first imposed a 10% tariff on imports of US LNG in September 2018, in retaliation for tariffs that the US imposed on imports of Chinese goods. Last month, China raised its tariff on imports of LNG from the US to 25%, in retaliation for increased US tariffs. While the two sides recently agreed to halt further tariff increases, as they try to negotiate a comprehensive trade deal, shippers from US LNG facilities will continue to face adjustments as long as the existing duties are in place.
The American Petroleum Institute fears that if there's not any agreement to the US dropping its tariffs and China dropping its retaliatory tariffs, the standoff will have an enduring impact on flows across the global LNG market, Aaron Padilla, senior adviser for international policy, said in a telephone interview.
"It will reduce quantities being able to go to China, which in the global markets has been a premiere buyer, and it may also have an effect on stymieing the final investment decisions for pending liquefaction terminals in the US that are at an earlier phase and are seeking capital and final investment approval in order to begin construction," Padilla said.
China, in turn, would have an incentive to turn increasingly to Russia, Australia, Malaysia and other exporting countries to get the LNG it needs, Padilla said.
In the second quarter, the US delivered 116 LNG cargoes to global destinations, compared with 75 over the same period in 2018, Platts Analytics data showed.
Deliveries to Mexico, which was the largest buyer of US LNG in 2018, remained flat, year-on-year. Deliveries to China, on the other hand, which was the third-largest export destination in the second quarter of 2018, fell to zero.
On the flip side, exports to Spain and France rose to 10 cargoes and 11 cargoes, respectively, both up from zero over the same period last year. In South America, a four-cargo increase in deliveries to Brazil and an additional two cargoes delivered to Chile, year-on-year, also helped pick up the slack.
With US exporters preparing to release financial results for the second quarter, the market over the next several weeks will get an idea of how the trade flow shifts have impacted the bottom line.
-- Harry Weber, Harry.Weber@spglobal.com
-- Ross Wyeno, email@example.com
-- Jim Magill, firstname.lastname@example.org
-- Edited by Gail Roberts, email@example.com
Bunker Markets in 2020: Clean Fuel, Cloudy Prospects | Tuesday, July 9 | 10-11 am CDT
Join S&P Global Platts oil specialists to discuss how the oil markets are being impacted by IMO 2020. Get updates on current market dynamics, the latest industry pricing and news, and submit questions to our oil team.Find out more