Trump's positive rhetoric on China not matched by crude, LNG, coal trade

Singapore

MARKETS have cheered US President Donald Trump's assertion that a deal with China is "very, very close", but data on China's imports of US oil, liquefied natural gas and coal show that once a trade flow is interrupted, getting it back is hard.

China's imports of US crude oil were zero for a second month in a row in January, according to Chinese customs data released on Monday. For full-year 2018, in contrast, China imported 245,616 barrels per day (bpd) from the United States, up 25 per cent from the year before. This made crude oil one of the successes in efforts to lower China's trade surplus with the United States. The advent of Trump's trade tariffs, however, resulted in the flow being choked, even though crude wasn't subject to retaliatory measures from Beijing.

There are also few signs of the trade resuming despite the conciliatory language by Trump and extended negotiations between senior officials of the world's two largest economies.

No US crude is expected to land in China in February or March, according to vessel-tracking and port data compiled by Refinitiv. One vessel carrying almost 2 million barrels is scheduled to arrive in mid-April, the data shows.

Given the six to eight-week sea voyage from the US Gulf Coast to China, it's likely the earliest significant pick-up in imports from the United States would be May or June.

It's much the same for liquefied natural gas (LNG) shipments, with Refinitiv data showing one cargo unloaded in January, and none booked for arrival in the coming months. This compares with seven cargoes that discharged in January 2018, and 33 for the whole of last year, amounting to 2.3 million tonnes of the super-chilled fuel.

Coal was another US energy export success that was curtailed by the trade dispute, with Refinitiv data showing no cargoes unloaded in January. One has been discharged so far in February, and another is expected before the end of the month, the data shows, while two more are scheduled for March.

In 2018, China imported 3.6 million tonnes of US coal, with the highest number of arrivals being the seven cargoes that unloaded in April. The dramatic slump in China's imports of US energy since the trade dispute ramped up in the middle of last year can likely be reversed, if a suitable deal is reached between Beijing and Washington.

But it's also likely to take longer than Trump may find optimal, given it takes time to re-establish trading relationships, book cargoes and get them delivered.

It remains the case that energy shipments are likely the best way for China to boost imports from the United States, given there is clear and growing demand for crude oil and LNG, and possibly even for coal, especially high-quality coking coal used to make steel.

What Beijing has shown, though, is that it can quickly and easily halt purchases of US energy products.

As a percentage of China's total imports, US supplies are modest and Beijing has had little difficulty in sourcing alternative cargoes.

US imports were just 2.7 per cent of China's crude oil intake in 2018. LNG imports from the United States were about 4.3 per cent of their total, and US coal about 1.3 per cent.

But because China is the world's largest importer of crude and coal, and second-largest for LNG, relatively small increases in the share bought from the United States would quickly translate into significant dollar amounts. REUTERS