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US LNG exports to China resuming thanks to tax waivers
PIPELINES & TRANSPORT
Four tankers are reportedly already on the way to China after loading cargoes in the US.
SHIPMENTS of US LNG to China are resuming after Beijing has reportedly started granting tax waivers to certain importers of the super-chilled fuel, according to shipping and trade sources cited by Reuters.
The news service reported on April 7 that four tankers were currently on their way to China after loading cargoes in the US last month, according to data from Refinitiv and Kpler. The data show that these tankers are due to arrive in China between late April and early May.
All four of the tankers are thought to be head- ing to Tianjin, where China National Offshore Oil Corp. (CNOOC) and Sinopec operate LNG import terminals. One of the tankers loaded its cargo from Cameron LNG in Louisiana, two from Sabine Pass, also in Louisiana, and one from Corpus Christi LNG in Texas.
This marks the first time since April 2019 that cargoes of US LNG have been shipped to China. Beijing imposed a 10% tariff on imports
of US LNG in September 2018 as the trade war between the two countries escalated. The tariff rate was raised to 25% in June 2019, and while some LNG trade had initially continued, fol- lowing the tariff increase Chinese companies stopped buying US cargoes of the fuel.
China announced in February 2020 that it would start granting exemptions to tariffs on certain US goods. This followed a prelimi- nary deal that was agreed between Beijing and Washington. Under this Phase 1 deal, China was supposed to dramatically ramp up purchases of US energy over 2020-21, but the coronavirus (COVID-19) pandemic has slowed progress towards this target.
Details on the companies that have received exemptions on the tariffs so far have not emerged, but Reuters cited two China-based sources as saying the tariff has dropped to zero, though a separate value-added tax of 10% still applies.™
KOGAS reportedly asks certain suppliers to defer LNG shipments
PERFORMANCE
KOREA Gas (KOGAS), one of the world’s lead- ing buyers of LNG, has reportedly asked some of its suppliers to defer shipments of the fuel as the coronavirus (COVID-19) pandemic continues to depress demand.
Both Reuters and Bloomberg reported the news on April 8, citing industry sources famil- iar with the matter. It is not yet clear whether the suppliers have agreed to defer cargoes as requested. According to Bloomberg’s sources, state-owned KOGAS started discussions on the matter this week with suppliers that include France’s Total and Malaysia’s Petronas.
The suppliers involved have term contracts with KOGAS. It is not clear which other suppli- ers may have been asked to defer cargoes, but the company has a wide variety of contracts, includ- ing with Russian and Qatari suppliers.
Data from industry group GIIGNL show that KOGAS buys 2mn tonnes per year (tpy) from Total under a contract that runs until 2031, and a further 2mn tpy under a 20-year contract with Petronas that runs until 2028.
One of Reuters’ sources said downstream demand had taken a hit in South Korea and had resulted in high inventory levels for KOGAS, leading the company to ask for the deferrals.
“Korea has been seeing more demand destruction for power and gas, as some factories cannot run due to a lack of parts being imported from other countries,” Reuters quoted one of its sources as saying. “The supply chain disruption is being realised ... so the demand view is very bearish,” the source added.
As South Korea is the world’s third-largest importer of LNG, any significant fall in deliver- ies of the fuel into the country could put further downward pressure on spot prices. This comes as LNG spot prices are already being battered by the combination of global oversupply and crater- ing demand, and indeed they fell to record lows last week.
Buyers in other Asian countries including India and China have also requested cancella- tions and delays of cargoes in response to market conditions.™
ASIA
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