Despite an agreement for China to buy more US energy supplies, Chinese demand for US LNG is unlikely to surge because tariffs on gas from the US remain in place.
Under a Phase 1 trade deal between the US and China, an additional $52.4 billion worth of US energy supplies, including LNG, will be bought by China over the next two years.
While the US and China negotiate a Phase 2 trade deal, a 25 percent tariff imposed by China on US LNG remains. The price of US gas pushed by the 25 percent tariff to above the spot market, restricting purchases.
Over the next two years, about 15 million-25 million tonnes a year are expected for China’s LNG demand over and above existing contracts.
China’s purchases of US energy will be increased by about $11 billion to $12 billion if it covers all of this demand with US LNG despite the tariffs. That amount equals to only one-fifth of the two-year target stated in the Phase 1 trade deal.
US LNG would still be about $1.50 to $2.50 per mmBtu more expensive than gas available in Asia if tariffs were removed.
