One country that could win big from the US-China trade war

If China follows through on its retaliatory threat of raising US liquefied natural gas (LNG) tariffs from 10 to 25 percent, US exports will be hit hard — but another country is waiting to gain from it.

Australia is poised to fill the gap for China, with its booming LNG sector well positioned. Last year, China imported 23 million tons of LNG from Australia, which made up about 42 percent of Australia’s exports. That figure could be increasing.

US LNG exports to China have plunged 80 percent this financial year, compared to the same time last year. President Trump’s threat to add an additional $300 billion in tariffs on China caused China to retaliate last week with the threat of raising tariffs to 25 percent on these imports starting June 1.

LNG producers in the US and other major LNG exporters will be anxiously waiting to see how the tariffs could impact major natural gas production plant developments — especially future projects in the works or awaiting approval. China is expected to go from about 53 million tons of LNG imports in 2018 to about 93 million tons in 2025 — as it moves steadily to become the world’s largest gas importer.

“Overall, this is a positive for the marketing of Australian LNG,” said Credit Suisse energy analyst Saul Kavonic about China looking to stabilize its supply.

“US LNG is a competitor to Australia, so the tariffs work to take Australia’s main competitor out of the market,” Kavonic said

Kavonic sees the trade war raising the risk of Chinese buyers looking to sign 20-year trade deals on imports.

A Wood Mackenzie study forecasts a $200 billion surge in new LNG development projects, with production sites capable of about 90 million tons expected to reach final investment commitments over the next two years. Much of that new LNG development was slated to take place in the US, according to the study.

Trump has hoped to fuel America’s role as a leading global LNG exporter. These construction projects were expected to support the country’s shale gas boom. The US is the fastest-growing LNG exporter in the world, and analysts predict the country will rank right behind Qatar and Australia by the end of this year.

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