Gas: When the Chinese buy American LNG and sell it to Europe at higher prices

At this level, if you’re underneath the disagreeable impression that Europe is the turkey of stuffing, and we’re being pushed round by the remainder of the world, I believe you might be proper!

Big Commission’s newest success is the profitable sale of overpriced Chinese fuel, which provides the following headline on the La Tribune website.

While the Chinese buy American LNG and sell it to Europe at higher prices

With the People’s Republic’s financial system slowing, Chinese firms discover surplus volumes of American LNG that they sell at higher prices, significantly to European Union international locations trying to exchange Russian fuel.

A Chinese freighter that buys American LNG to resell it in Europe at a higher value. This story, reported by the Wall Street Journal (WSJ), illustrates the present increase in the pure fuel market, the complexity of its interactions and the main function performed by China. Thus, the Chinese personal fuel firm, ENN Natural Gas, which gives 10% of the nation’s fuel provide, should ship an LNG provider chartered by a Japanese firm to load LNG (liquefied pure fuel) on the Louisiana coast on October 18. From the Gulf, provided by certainly one of the giants of this sector in the United States, Cheniere, in accordance to info from the WSJ.

60,000 to 80,000 tons of cargo

But this LNG provider ought to go to Europe somewhat than to China’s east coast, the place prospects are prepared to pay excessive prices to obtain these deliveries of LNG, the solely choice to compensate for the suspension of Russian fuel purchases. Moscow’s resolution to invade Ukraine. According to analysts, for a single cargo (60,000 to 80,000 tons), ENN ought to make a revenue of $110 to $130 million.

This commerce off is the results of a number of elements. Due to the “Zero Covid” coverage applied to fight the pandemic, financial exercise in the People’s Republic is slowing down. According to the World Bank, its progress this yr needs to be solely 2.8%. As a consequence, home fuel demand grew 1% much less in the first eight months of the yr than in the identical interval in 2021, after leaping 12% final yr in contrast to 2020, in accordance to information from the International Energy Agency (IEA). Whether Chinese LNG importers discover themselves with surpluses (30% in accordance to the IEA) provides them the selection to resell them in the Asian spot market or to different prospects in Europe, Japan and South Korea. “Only 19 LNG-carrying U.S. LNG carriers docked in China in the first eight months of the yr, in contrast with 133 for the identical interval final yr,” the WSJ mentioned.

This configuration is the oblique results of an settlement between Beijing and the Trump administration in February 2020 At the time, the two international locations, anxious to finish their commerce struggle, mentioned a variety of measures, together with the buy of duty-free American LNG. Tariffs on long-term contracts (from 10 to 25 years). Thus, US LNG producers are assured to sell their volumes, permitting them to make investments billions of {dollars} in creating new manufacturing capability. As for Chinese fuel firms, they profit from prices listed to the American Henry Hub benchmark index, that are a lot decrease than prices charged in Europe and Asia, and from the freedom to ship volumes wherever they like.

So we may go on like this for a very long time, however probably not that lengthy, as a result of by slicing off all of Europe’s capabilities, we’d go down the gap in a short time, each economically and politically.

We don’t dictate. The state of affairs there’s past comprehension.

Charles Sannat

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