An increase in Chinese US LNG purchases has been a welcome development for US exporters.
However, the volume increases might not be enough as top Chinese and US trade officials reviewed ‘phase one’ of the trade deal over the weekend.
China’s US imports totalled about $300 mill during the first half of the year, according to recent data from Panjiva, a S&P Global Market Intelligence business unit.
China has fallen almost $40 bill behind its commitments to buy US goods under the agreement amid coronavirus-linked supply chain disruptions and demand shocks. Imports of agriculture and energy, such as LNG, were a bright spot in the deepening gloom of political and trade relations between the two countries.
In January of this year, China agreed to more than double its imports of a basket of 548 US products, amounting to an extra $200 bill in purchases through 2020 and 2021, compared to 2017 levels.
LNG imports helped drive energy shipments, a category of goods in which China could make significant headway toward its targets. Energy products — which include LNG, oil, refined petroleum products and coal — should account for $52.4 bill worth of China’s purchases over 2017 levels across the next two years, although product-specific target details were not released.
For 2020, the target is $18.5 bill more than the 2017 level. But year-to-date purchases of energy had amounted to only about $2.9 bill by the end of June, according to Panjiva.
Even if the trade shortfalls do not halt the deal, market observers have warned that the escalating political tensions could. Analysts at independent research firm, ClearView Energy Partners, talking with Platts, said the trade bargain was “unlikely to outlast the November, 2020 US elections” and could collapse before then.
ClearView also said that political tensions also undermined a potential understanding between the countries that commitments to long-term supply agreements with US LNG developers will count toward the $52.4 bill target.
About 53.3 bill cu ft of US LNG was shipped to China from March through May, according to an S&P Global Market Intelligence analysis of the most recent LNG export figures from the US Department of Energy, released last month.
In June, China increased purchases of NG by 29% year-over - year amid a slow world market recovery from disruptions caused by the pandemic, according to data released by the country’s General Administration of Customs. Imports of LNG from the US amounted to about 340,000 tonnes, the highest volume since May, 2018.
The largest US LNG exporter, Cheniere Energy has shipped “over half a dozen cargoes now to China as things there start to normalise … in terms of demand, in terms of tariffs, and [as] other opportunities present themselves,” Cheniere Executive Vice President and CCO, Anatol Feygin said during an 6th August earnings call.
“Clearly, there is a headwind in terms of the geopolitical backdrop that we’re operating in,” Feygin added. “But commercially, there’s a massive tailwind. And this is the flexibility, the reliability that we’ve demonstrated, the relationships we’ve built on the commercial side. [They] all position Cheniere quite well to capture a substantial share of that market when the stars align.”
