Trade war slams door on long-term US-China LNG deals
A ratcheting up in tensions has slammed the door on long-term US-China LNG deals.
The US-China trade spat has shut the door on long-term LNG deals between the two countries and damaged sentiment in the global gas market according to the Australian-listed developer of the $US5 billion ($7.3bn) Magnolia LNG project in Louisiana, Liquefied Natural Gas Limited.
China, the world’s fastest growing importer of the fuel, hiked the tariff on US LNG to 25 per cent from June 1 compared with the current rate of 10 per cent.
That followed President Donald Trump’s decision last week to hike US tariffs on $US200bn of Chinese goods.
The ASX-listed and Houston-based LNG developer says the decision had been felt in the market, potentially frustrating its efforts to sign up customers for the project.
“The main effect is long-term deals between business entities from the US and China will not be signed until this dispute is settled,” LNG Ltd said in a statement. “This pause impacts the entire LNG market as others around the globe are being cautious with decisions while this dispute is ongoing, especially when coupled with other emerging factors including a soft spot market for LNG.”
LNG Ltd (LNG) shares had dipped 1 cent, or 2.5 per cent, to 38.5c by 2.30pm (AEST).
Asian LNG spot prices are trading at three-year lows with Japan, China and South Korea slowing their purchases following a mild winter and high stockpiles.
While US LNG accounted for just 5 per cent of total Chinese imports in 2017 and about 7 per cent last year, analysts say the major impact will be on a second wave of US export projects trying to secure financing to move projects to a final investment decision.
LNG Ltd plans to make a final investment decision on its 8 million tonne a year Magnolia export project in the second half of 2019 after initially targeting a call earlier this year.
The company issued a plea for the world’s two largest economic powers to find a resolution to the trade war.
“It is our strong hope that China and the US will strive for an agreement as businesses in both nations remain anxious to transact with each other. A resolution to the China-US trade issue will also likely lead to increased urgency in other global LNG markets.”
China overtook Japan last year as the world’s top LNG importer spurred by a coal-to-gas switching policy to cut high air pollution levels.
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