London - With 25% tariff on LNG still in play, the Phase-1 deal between the US and China is not expected to bring any significant change in the LNG trade between the two countries, writes research firm Drewry. However, with China requiring additional LNG supplies in the coming years, the US still has the opportunity to become an important supplier for the soon-to-be world’s largest LNG market.
The US and China recently announced a Phase-1 deal to reduce the trade tensions between the two countries, wherein the latter pledged to purchase $200 billion worth of US goods, which includes $52 billion of energy products such as coal, crude oil, refined products and LNG.
The de-escalation in tensions marks a welcome step towards improving the global economy, which has suffered due to the trade dispute between the two large economies.
However, when it comes to LNG, the effect will be limited as China has retained its 25% tariff on US-sourced LNG. The tariff will critically restrict any development of LNG trade between the US and China, especially in the current market scenario where LNG supplies are abundant and prices are at an all-time low.
Asian LNG prices in January 2020 were below $5 per MMBtu and are projected to fall further, with additional liquefaction capacity coming online in 2020.
On the demand side, a mild winter and weakness in the global economy impacted LNG imports in Asian countries such as China, Japan and South Korea, resulting in a lower-than-expected demand growth.