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China gets first US LNG cargo since imposition of retaliatory tariffs

Highlights

Delivery comes amid weak spot LNG demand in Asia-Pacific

China-destined LNG replaced with non-US volumes: Cheniere

Singapore — China's state-owned CNOOC received an LNG cargo from the US into its Ningbo terminal Sunday, the first such delivery since China imposed a 10% retaliatory tariff on US LNG imports effective September 24, according to S&P Global Platts Analytics.

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The delivery comes amid weaker-than-expected demand for spot cargoes in east Asia, despite the region having entered the peak of its winter demand purchasing season. The Platts JKM has been in decline since hitting a multi-year high of more than $12/MMBtu in mid-September. The spot benchmark for December deliveries was assessed at $10.35/MMBtu Friday.

Weak Asian LNG, stronger NBP/HH could keep US LNG pointed toward Atlantic

"Some US volumes were anticipated to go to China during a very tight market because China might not have been able to find an alternative," said Jeff Moore, manager of Asian LNG Analytics. "What is shocking about this cargo making its way to China is that it seems to be because of lack of demand elsewhere."

While tariffs are likely to continue limiting US LNG deliveries to China, weak LNG fundamentals in Asia and rising prices in the European and US gas hubs should keep most of the US LNG supply pointed towards the Atlantic basin in the near term, Moore said.

The LNG carrier Ribera Del Duero Knutsen lifted the cargo from Cheniere Energy's Sabine Pass LNG on the US Gulf Coast October 10 and arrived at Ningbo November 11, Platts trade flow software cFlow showed. Shell is the likely supplier of the cargo, trade sources said. The portfolio seller has a long-term offtake contract from Sabine Pass and several supply agreements with CNOOC.

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US-CHINA DIVERSIONS

US LNG cargoes originally destined for China have been diverted to other markets since China's retaliatory tariffs on an additional $60 billion worth of US imports, including a 10% tariff on LNG, became effective.

"We have swapped all of our cargoes to PetroChina with non-US origin volumes," a source with Cheniere Energy, the US' biggest LNG exporter, told Platts Friday.

"Our business in China will not be affected by the tariff, as we have very flexible terms with our customers."

The tit-for-tat escalation in the trade war between the two countries came after the US said it would impose a 10% tariff on an additional $200 billion worth of Chinese imports from September 24, and further lift the duty to 25% from January 1, 2019.

Shell and CNOOC were not immediately available for comment.

-- Abache Abreu, abache.abreu@spglobal.com

-- Edited by Jonathan Fox, jonathan.fox@spglobal.com