Pressure on gas: China has changed its mind about buying LNG from the United States
Against the background of the trade war with the United States, China has completely stopped importing American LNG. The last shipment arrived in Fujian Province on February 6, and there were no new shipments. One of the liquefied gas tankers from overseas was redirected to Bangladesh, failing to arrive before the tariffs took effect. Due to the crisis in trade relations with Washington, Beijing is increasing imports from Russia, and Moscow has every opportunity to meet this demand. Details can be found in the Izvestia article.
Well, don't
"With an increase in tariffs to the level of an actual embargo, we are witnessing a redistribution of global LNG flows," Richard Bronze, an analyst at Energy Aspects consulting company, said in a commentary for The Financial Times (FT).
According to the publication, due to Beijing's decision, the total demand for LNG in Asia may decrease by 5-10 million tons, which will lead to a slight decrease in fuel prices in Europe. In particular, China has completely stopped importing liquefied natural gas from the United States amid escalating trade disputes between the states.
Chinese companies have 13 long-term contracts in hand for the supply of LNG from the United States until 2049. However, they are unlikely to be implemented.
On April 2, Donald Trump announced the imposition of customs duties on products from 185 countries and territories, Russia was not on this list. The "general" 10% tariffs came into force on April 5, and four days later, "individual" tariffs were launched, calculated for each individual state.
In addition, on April 9, the American leader announced the suspension of additional import duties for 90 days, which were introduced on the principle of reciprocity. At the same time, Trump increased tariffs on all Chinese products to 125%, and taking into account the previously imposed 20% tariffs for "insufficient efforts by Canada, Mexico and China to combat fentanyl smuggling into the United States," the total amount of duties on goods from China now reaches 145%.
From Russia with love
Last year, China received 8.3 million tons of LNG from Russia, which is the third largest after Australia (26.19 million tons) and Qatar (18.34 million tons). American shipments totaled 4.2 million tons, but now they are known to be frozen.
According to Bloomberg, there was a similar pause five years ago, during the last trade conflict. In general, even if the trade disputes are settled, Beijing will calmly do without American gas. China relies on trusted suppliers, primarily Russia. This was openly stated by Chinese Ambassador to Moscow Zhang Hanhui at a recent oil and gas forum.
The Russian Federation, in turn, is ready to increase exports: in 2024, the country produced 34.7 million tons of LNG, which is 5.4% more than a year earlier, 33.6 million of them were exported. The reorientation towards Asia has helped Russia offset losses due to European sanctions.
By the way, despite the restrictions, the first deliveries within the framework of the Arctic LNG-2 project have begun. This happened just against the background of the deterioration of US-Chinese relations.
Yamal LNG Liquefied Natural Gas Production Plant
Currently, two large liquefied natural gas plants are operating in Russia: Yamal LNG, with a design capacity of 17.4 million tons per year, and Sakhalin-2, with a planned annual capacity of 9.6 million tons.
At the same time, three more projects may be launched in the next five years: Murmansk LNG, Arctic LNG-1 and Ob LNG.
Together, they will produce another 47 million tons annually. As a result, according to plans, Russia will produce 90-105 million tons of LNG by 2050, and China is clearly counting on its share.
Currently, China is deliberately moving away from American gas and is betting on Russia. This is beneficial for Moscow: sanctions have pushed for a reorientation to Asia, and new projects will increase exports. The only question is how quickly Beijing will want to increase purchases, but it all depends on politics and prices in the market.
In the meantime, China is pursuing diversification, while Russia is expanding production. So the cooperation will only grow stronger in the coming years.
What do the experts think
Investment adviser, founder of the University of Finance, Yulia Kuznetsova, in an interview with Izvestia, noted that Beijing's suspension of purchases of American liquefied natural gas in the midst of a trade war is not just a gesture, but a strategic choice of partners.
— Russia will cooperate because China has a huge demand for energy resources, the country is actively replacing coal and strengthening energy security. The United States is an unstable partner, given the logistics, sanctions, and political pressure. Russia is nearby and ready to increase capacity and sell more, logistics is shorter, interests coincide. The focus is now on the Arctic LNG-2, Yamal LNG and the future Murmansk LNG projects. It is estimated that Arctic LNG-2 alone is capable of producing up to 20 million tons of LNG per year, and a significant part can go to China, the analyst is sure.
She added that Moscow would be interested not only in supplies, but also in joint projects with China, which means that this is not just trade, but a geo-energy partnership for decades.
The head of the Department of Logistics, Professor of the Financial University Ivan Petrov, in a conversation with Izvestia, noted that the share of the United States in Chinese LNG imports ranged from 1 to 5% in different periods.
— Currently, the main suppliers are Australia, Qatar and Malaysia. The latter supplies volumes of gas commensurate with Russia (10-12 billion cubic meters). As we can see, China has many other LNG suppliers besides the United States and Russia, and Moscow is not the largest player in this market. On the other hand, Russia's main priority is gas pipeline exports to China. Currently, the niche previously occupied by the United States is being occupied by the United Arab Emirates. China is very pragmatic in choosing LNG suppliers and gives priority to cheap gas, which Russian fuel is not," the expert said.
He stressed that Australia, which supplies twice as much LNG to China as Russia, provides a better price.
"Chinese interest in Russian LNG is driven to a greater extent by interest in the Arctic and the Northern Sea Route, so businesses from China will not just purchase Russian liquefied natural gas, but participate in energy projects in the Arctic, including creating port infrastructure, ice-class LNG tankers and large-capacity production facilities," the analyst explained.
In his opinion, China's interest in Russian LNG may be due to its re-export to other countries, including the EU.
— The most profitable route for the supply of Russian LNG to China in the eastern direction runs along the Northern Sea Route, but this route is limited by the ice situation. The Western logistics route is more expensive and is limited by the ban on transshipment of Russian LNG from ice-class gas carriers to LNG tankers in EU ports," Petrov summed up.
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