By Henning Gloystein and Jessica Jaganathan
SINGAPORE (Reuters) - U.S. exports of liquefied natural gas (LNG) to China in July fell to their lowest level in a year and are expected to decline further as the Sino-U.S. trade dispute forces utilities to seek alternative supplies.
In an escalating trade dispute, China last week said it may slap a 25 percent import tariff on U.S. LNG supplies in retaliation to a raft of duties on Chinese goods that U.S. President Donald Trump has announced since June.
"The import tax will make U.S. exports of LNG uncompetitive," energy research group Bernstein said in a note this week.
Traders said Chinese buyers were already seeking alternatives.
"The Chinese are already indicating that they would prefer not to take U.S. cargoes for any new spot deals," said a Singapore-based energy trader who deals with Chinese LNG importers.
He declined to be identified because he was not authorised to speak publicly about commercial operations.
The main beneficiaries of this shift are producers in the Asia/Pacific region, who have been quick to snatch market share from the United States since the trade disputes broke out in June.
"Short-term, alternative volumes could come from many other projects including the more proximate Australian, Papua New Guinean (PNG) and Qatari projects which have some flexible volumes," said Saul Kavonic, Director of Asia/Pacific Markets and head of energy research for Australia at Credit Suisse (SIX:CSGN).
Graphic: Major LNG suppliers to China (https://reut.rs/2Mt6hBx)
Shipping data shows that U.S. LNG sales to China have already slumped from almost 400,000 tonnes in May to just 130,000 tonnes in July, while supplies from Australia, Malaysia, Indonesia, Russia and Papua New Guinea have increased.
U.S. LNG exports only started in 2015, and sales to China were a booming business opportunity for the American natural gas industry. They were also a convenient tool to reduce the American trade deficit with China.
Analysts said U.S. LNG sellers such as Cheniere (A:LNG) would still be able to find a home for its supplies, including in Europe.
Still, they warned that the spat with China could stall planned future U.S. export projects that were hoping to sell into China.
"While Chinese tariffs will not halt the United States's rise to be among the world's top-3 largest LNG exporters, they could slow or stop the progress of some projects... reducing the overall weighting of U.S. LNG in the global LNG mix over the next decade," said Credit Suisse's Kavonic.