LNG tariff threat but China imports from US currently limited

Edward Cox

04-Feb-2025

LONDON (ICIS)–The ICIS Dutch TTF near-curve market fell on Tuesday morning, which traders in part attributed to China’s intention to introduce a 15% tariff on US LNG from 10 February.

While any reduction in US LNG to China due to the tariffs could in theory mean more LNG to Europe, traders recognized the overall market impact may be limited.

“China’s LNG imports from the US are already quite low – but as long as tariffs are in place China won’t import from the US, especially with the TTF already so high,” said one trader.

A second trader said that the development was bearish for European gas markets in the short term, while other traders also noted minimal impact due to the current intake of US LNG into China.

Large Chinese LNG buyers have over 20mtpa in new long-term contracts from the US due to start in the next few years.

But right now, much US LNG to China is sold on a spot basis – with China only accounting for 5% of total US LNG exports in 2024, according to ICIS data.

Two or three US cargoes have been delivered to China each month between November-December 2024, according to ICIS data.

Europe and the UK – excluding Turkey – took in 49% of US LNG in 2024 in comparison, due to more favorable market pricing.

LEARNING FROM HISTORY

In 2018 and 2019 China imposed tariffs on US LNG: 10% to start, before rising to 25%.

It came as US LNG was ramping up quickly, with production doubling over 2019.

ICIS data shows some reduction in US LNG to China on a 10% tariff and then a complete stop under a 25% tariff.

This time the proposed tariff is put at 15%.

A range of sellers supply US cargoes into Chinese terminals.

While adding 15% to the cost of buying a US contractual cargo of LNG for delivery into China may still allow for a reasonable seller margin – especially if sold on a spot basis – the destination-free nature of US LNG offtake means cargoes can relatively easily be shipped instead to other markets.

Chinese LNG buyers themselves are increasingly developing positions in Europe and trading the TTF, for example.

Large sellers may be able to optimize and draw on other supply source to cover positions into China to avoid the tariff.

Australia and Qatar are much larger LNG suppliers than the US to China currently, with large volumes sold under term contracts, but perhaps limited flexibility to ramp up additional sales if needed.

The tariffs come with Chinese LNG demand down by 25% year on year in January and no immediate urgency to pull in additional spot volumes.

However, ICIS forecasts a 6% rise in China’s 2025 LNG imports from 2024, supported by the government’s stimulus plan which already took the potential impact of US tariffs into account.

Summer demand could be strong on higher temperatures lifting gas demand for power generation.

A desire not to import from the US would cause a headache for Chinese LNG importers if they need to ramp up demand at short notice.

Global LNG production is expected to rise by 16.3 million tonnes in 2025 due to the addition of new US and Canadian LNG.

The market will closely follow the expected dialogue between Trump and Chinese President Xi Jinping later this week.

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