Billions put at risk for US LNG exports on China 25% tariffs

Bloomberg

China is threatening to impose a 25 percent tariff on imports of US liquefied natural gas, potentially a major blow to an emerging American business.
It’s the first time the fuel has been ensnared by the trade war, coming as part of a $60 billion response to a Trump administration plan to impose more levies. The move adds new pressure on the US industry, which is competing with Russia, Australia for market share in China as the Asian giant moves to reduce its use of smog-inducing coal.
Billions of dollars may hang in the balance. Cheniere Energy Inc., Tellurian Inc. and other LNG developers have courted utilities and state-backed companies in China to justify building more terminals to ship the super-chilled gas abroad. Cheniere and Tellurian shares slid on the report.
“At least in the short term any Chinese buyer looking for long-term supply would have to drag their feet on signing a US contract,” Jason Feer, head of business intelligence at Poten & Partners Inc. in Houston, said.
Cheniere, which began exporting LNG in 2016, said in a statement that it does “not view tariffs as productive.” The company “continues to see China as an important growth market and LNG as a ‘win-win’ between the United States and China,” spokesman Eben Burnham-Snyder said.
China trails only Mexico and South Korea among the biggest buyers of US LNG. It accounted for 13 percent of the exports from Cheniere’s Sabine Pass terminal in Louisiana as of mid-June, based on ship-tracking data compiled by Bloomberg. The Houston-based company dropped as much as 7.7 percent after the report, the biggest one-day percentage decline since 2016, while Tellurian slid as much as 6.7 percent.
Charif Souki, Tellurian’s chairman, downplayed the threat in an email, saying, “American gas doesn’t come with a ‘Made in America’ label on the molecules. This will not affect the trade, but will simply make gas more expensive to Chinese consumers.”
Liquefied Natural Gas Ltd., which is developing an export terminal in Louisiana, said it will continue to work with Chinese buyers despite the potential for tariffs. “Chinese buyers and US exporters want this resolved,” Greg Vesey, the company’s chief executive officer, said in an emailed statement. “Maybe now this gets everyone to the negotiating table to find a mutually beneficial solution.”
Earlier this year, China emerged as the world’s biggest gas importer, topping Japan. If the tariffs are implemented, China could increasingly turn to Australia, one of the world’s biggest LNG suppliers, said Warren Patterson, commodity strategist for ING Bank NV.
At the same time, Russia plans to begin pumping gas to China through its newly-built 4,000 kilometer Power of Siberia pipeline by the end of 2019.
Cheniere already has made inroads in China. With the country’s traditional suppliers in Central Asia unable to keep up with demand during the recent winter, the US exporter moved to help fill the gap.