China Receives First LNG From the US in More than a Year, Plans to Resell to Avoid Taxes
July 24, 2023- According to sources from Bloomberg, Chinese importers have just received the first shipment of liquefied petroleum gas (LNG) from the US after more than a year, but plan to resell this shipment in other markets to enjoy higher prices and avoid paying 25% import tax.
First LNG shipment from the US in more than a year
Yangpu Port in southern China has received LNG shipments from the Plaquemines LNG export facility operated by Venture Global in Plaquemines Parish, Louisiana. This is the first gas shipment from the US to China in more than a year.
However, the gas unloaded into bonded storage is not officially imported into China, because the buyer will have to pay a 25% tax on this shipment.
Plan to resell the lot to enjoy a higher price
According to Bloomberg sources, this shipment was purchased with the intention of reselling it in foreign markets at a higher price. Ship tracking data monitored by Bloomberg shows an empty tanker just docked at Yangpu port, likely to carry gas for re-export.
This move shows that China is not so short of LNG that it is willing to pay a 25% tax to restart imports from the US.
Recent situation of China's LNG imports
While the Middle East war has reduced exports from Qatar and the UAE over the past five months, China's LNG imports have rebounded in recent weeks due to higher seasonal demand.
China increased LNG imports for two consecutive months in June as the world's largest LNG importer prepares for peak electricity demand in the summer.
According to official customs data released last week, China's LNG imports increased 8.3% year-on-year to 5.68 million tons in June. This is the second consecutive month that China's LNG imports increased year-on-year, following three months of declines in the number of LNG ships docking at ports in February, March and April.
Summary table of China's LNG imports
| Month | Change compared to the same period last year | Import volume (million tons) |
|---|---|---|
| April | Reduce | No details announced |
| May | Increase | No details announced |
| June | Increase 8.3% | 5.68 |
China's LNG import recovery trend
China's imports began to recover in May, after hitting an eight-year low, as importers began purchasing more shipments in mid-April and have maintained high import rates since then.
China's supply diversification strategy
China's giant state-owned LNG importers are also in talks to secure long-term LNG supplies from exporters that do not need the Strait of Hormuz, according to people familiar with the planning, as the world's largest LNG importer seeks to minimize risks from gas deliveries from the Persian Gulf.
Conclude
The incident shows that China has a flexible strategy in meeting its energy needs, prioritizing more affordable sources of supply and diversifying supplies to minimize geopolitical risks. The resale of LNG shipments from the US also shows the acumen of Chinese importers in taking advantage of price differences in the global market.
Amid rising global LNG demand and disruptions to traditional supplies from the Middle East, China's strategy could set a precedent for other countries in optimizing energy supplies.
The article is transferred from Oilprice.com