The row between Australia and China may affect the LNG trade between the two countries, analysts said. Australia advocates an international investigation into the origins of COVID-19, which angers China. As a response, Beijing suspended Australian beef imports and threatened to impose tariff on Australian barley. Beijing’s move is unexpected given the food security issues and the ongoing tightness in meat supply after the lockdown.
For now, LNG has been protected or even immune, thanks to energy security concerns and the contractual nature of LNG trade. However, market participants are not ignoring the possibility that seaborne LNG trade gets embroiled in the spat. LNG is an easy target for China because it can source the fuel from other suppliers amid the current oversupply.
China is Australia's largest trading partner and its largest export destination. About 31% of Australia's total exports went to China in the fiscal year 2017-2018. Iron ore was Australia’s biggest exports to China, followed by coal in number two, while natural gas is the fourth-largest. Other top-ten commodities included gold, aluminum ores, beef and crude oil.
