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China LNG buyers seek to swap US cargo after new tariffs

Singapore

LIQUEFIED natural gas buyers in China are seeking to swap their US shipments for cargo from other nations after Beijing pledged to raise tariffs amid a deepening trade dispute, according to traders with knowledge of the situation.

Some Chinese LNG buyers have approached suppliers about trading the US cargo, which they've already committed to buy, for shipments from non-tariff nations, said the people, who asked not to be identified as the information isn't public.

While China's imports of American gas have dropped since it slapped a 10 per cent duty on the fuel in September, pressure is mounting to completely avoid the cargo after Beijing said on Monday it would boost the tariff to 25 per cent from June 1.

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The trade war has derailed what should be a natural partnership, as the US vies to become the world's top exporter of LNG and China is on track to become the largest buyer.

While cheap shale gas had helped US exporters undercut other sellers that are nearer to China, the bigger tariff makes American LNG uncompetitive and has discouraged long-term partnerships.

China has imported four LNG cargo units from the US so far this year, down about 80 per cent from the same period last year, according to vessel tracking data. That compares with a 21 per cent jump in total LNG imports during the first quarter.

"A lot of imports so far have been spot cargo or from portfolio players," said Xizhou Zhou, an analyst at IHS Markit, referring to shipments from the US. "These volumes face challenges now in today's low spot price environment." BLOOMBERG