“Well Here’s Another Nice Mess You Got Us Into”

I guess threatening China did not work out as well as Trump planned it to be. China walked away from the US, starting with liquefied natural gas (LNG).

China has just announced a complete halt on all liquefied natural gas (LNG) imports from the United States. A decision made abruptly with no prior indication, no phased reduction and no explanation beyond a terse statement from Beijing.

One moment American LNG tankers were in route across the Pacific. The next they were stranded, contracts frozen, and billions of dollars hanging in limbo. This isn’t just another trade dispute. This is a deliberate geopolitical strike. One that could reshape the global energy balance, upend critical supply chains, and leave US exporters bleeding.

China was one of the fastest growing markets for American LNG, importing more than four million tons annually. Cutting that overnight is more than symbolic, it’s surgical. An elimination of economic value the US cab ill afford to lose.

The US was eliminated from one of the world’s most lucrative gas markets worth more than US $2.4 billion a year. More than 4.4 million tons of American LNG every single year now suddenly has nowhere to go.

To close the door even more on the US, China is shifting in bound LNG shipments to Europe where LNG is in greater demand due to the Ukraine – Russian war. It is offering the LNG at competitive prices which will also play against the US. The US just lost energy influence in Europe.

In March, China signed a contract with Australia to supply LNG. Australia will begin supplying 600,000 tons of LNG per year, starting in 2027. Just a start of a potential growing trade with a country other than the US. Right now, the cost is 20% cheaper than US shipments. This is due to proximity and lower transportation costs. It takes roughly 10 fewer days for Australian cargo to reach Chinese ports.

As I always comment, less idle inventory. Think six weeks in ocean transportation from China to the US of product for which customers already own. Yep, it is longer. Less cost shipping to Australia.

And what about U.S. trade with China?

The US is running a deficit with China. A $295 billion deficit. If the US was to stop buying product (or China closed its doors) from China, US commercial interests would have to source elsewhere which would take time. The US does not sit in a place of power and US would have lesser power in negotiations.

China is taking Trump (not the U.S.) to task. Although, the U.S. will suffer due to Trump’s incompetence in bargaining in a global economy. All the people who put him in office will suffer from his global incompetence. Needless to say , , , but, I did say it.

Much of the detail is taken from: “US LNG crippled as Australia seizes US$1.5b trade overnight,” Pearls and Irritations.