Column: US risks losing long game in China LNG spat: Bousso

China HK Power Smart Energy

06/02/2025 17:58

(The opinions expressed here are those of the author, a
columnist for Reuters.)

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      Chinese buyers of US LNG could divert cargoes to Europe
    

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      China's share of US LNG offtake set to grow
    

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      Tit-for-tat tariffs could impact new US LNG projects
    

  
 (Adds details)
    By Ron Bousso
       LONDON, Feb 6 - The burgeoning trade war between the
United States and China has caught American gas exporters in the
crossfire as they face the prospect of losing their edge in the
world's fastest-growing LNG market.
    Buyers of U.S. fuel will likely respond by redirecting more
supply to Europe, where gas prices are today stronger than in
Asia, a short-term solution that could even benefit Chinese
traders.
    Beijing slapped a 15% tariff on imports of U.S. liquefied
natural gas, after U.S. President Donald Trump announced last
Saturday that he was placing a 10% charge on all Chinese
imports.
    This move will have minimal impact on China's energy
markets, given that U.S. LNG represents only 5.5%, or 4.3
million metric tons, of its total LNG imports, according to
Kpler data.
    But the effect on U.S. gas exporters could be far greater if
these tariffs prove durable.
    Until recently, Asia, and China in particular, were
considered key growth markets for the rapidly expanding U.S. LNG
sector, which is expected to see supply double to around 200
million tons per year (mtpa) by 2028 from 100 mtpa currently,
according to LSEG data.
    China's share of U.S. LNG offtake is set to grow sharply.
Chinese importers have committed to buying nearly 20 million
metric tons per year from existing and new U.S. export terminals
in contracts that often exceed 20 years, according to Reuters
calculations.
    Such long-term contracts are vital for U.S. companies
seeking to secure financing for expensive LNG production
facilities. A China-U.S. trade war would likely dampen Chinese
companies' appetite to sign further supply contracts, casting
doubt on the viability of the next wave of U.S. projects that
would start towards the end of the decade.  
    REDIRECTING SUPPLY
    In the short term, Chinese traders of could respond to
Beijing's actions by directing contracting U.S. LNG supply to
Europe, where LNG is set to command a higher price than in China
in the coming months as European buyers replenish depleted
inventories following a relatively cold winter.
    They will benefit from the fact that unlike many other
producers, U.S. LNG exporters place little or no restrictions on
cargo destinations, meaning buyers can ship them where they
like. This allows nimble traders to respond to changes in global
supply and demand and divert cargoes to buyers offering higher
prices for the fuel.
    Benchmark European TTF gas prices in recent weeks moved into
a significant premium to Asian LNG prices, with the spread
between two contracts currently near its highest since October
2023, reflecting the tightening of European supplies while Asian
demand relatively sagged.
    Deliveries of the super-chilled fuel have been key to
helping Europe offset the abrupt drop in Russian pipeline gas
supplies following Moscow's invasion of Ukraine in 2022.
    Consequently, the United States has become Europe's largest
LNG supplier, accounting for 45% of imports into the region last
year, according to Kpler data. Europe is already the largest
buyer of U.S. gas exports.
    But pushing ever more LNG into Europe is a short-term fix.
Europe's gas demand is expected to decline over the long term,
given its intent to reduce carbon emissions by shifting to
renewables. In fact, consumption is forecast to decrease from
507 billion cubic metres (bcm) in 2023 to between 281 and 407
bcm by 2035, according to the International Energy Agency's
scenarios. And that's after it fell some 20% following the 2022
energy crisis spurred by Russia's invasion of Ukraine.
    Chinese domestic gas demand, on the other hand, is forecast
to rise from 398 billion cubic metres (bcm) in 2023 to between
397 and 522 bcm by 2035, according to the IEA.
        So the European market may be a band-aid to help U.S.
gas producers staunch any tariff-induced bleeding, but the trade
disruption will still likely be a net negative for U.S.
exporters over the long run.
    And even though Europe may appear to be the primary
beneficiary of this burgeoning trade war, its growing dependency
on U.S. gas could mean the bloc is simply replacing decades of
overreliance on Russian gas with an outsized dependence on a
superpower that has grown increasingly protectionist under both
Republican and Democratic administrations.
    President Trump once famously quipped that "trade wars are
good and easy to win", but identifying any long-term winners
here is likely to prove challenging.

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Benchmark European and Asian LNG prices    https://www.reuters.com/graphics/LNG-PRICES/zgvoaodlovd/chart.png
China's LNG imports    https://www.reuters.com/graphics/CHINA-LNG/mopaweroopa/chart.png
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 (Writing by Ron Bousso; editing by David Evans)
 ((ron.bousso@thomsonreuters.com
+447887626565))