Russell: Asia's LNG imports will likely increase, but not enough to satisfy Trump
As part of the trade agreements with President Donald Trump, there are some early signs that certain Asian countries will increase their imports from the United States of liquefied gas (LNG).
According to commodity analysts Kpler, Asia's super-chilled fuel imports are set to reach a record of 2,01 million metric tonnes in August. This is an eight-month-high.
The Kpler forecast that Asia's imports of LNG from the United States would surge to 3,61 million tons in the month of October is far more important. This would be the second highest on record, behind the 3,75 million tons from February 2021.
The October prediction is subject to caveats, as the cargoes have only been pre-arranged and may never actually load.
Even if the actual volumes slip, October is likely to see an influx of U.S. Liquefied Natural Gas (LNG) arriving in Asia.
Although the buyers of all this LNG are yet to be revealed, initial data suggests that most will end up in North Asia. This largely includes Japan and South Korea.
As part of the deals made with Trump regarding import tariffs and investments, both the world's second and third largest LNG buyers have committed to increasing their energy imports.
The White House website stated on July 23, that Tokyo had committed to "majorly expanding" its energy purchases from the United States.
In a deal announced on July 30 by Trump, the South Korean government agreed to purchase energy products from the United States worth $100 billion. However, the exact timeframe for reaching this value was not specified.
The $100 billion figure is high compared to the amount of LNG, crude oil, and coal that South Korea imported historically from the United States.
South Korea will import 5.71 million tonnes of U.S. Liquefied natural gas (LNG) in 2024 at the current Asian spot prices.
According to Kpler's estimates, Japan will import 6.50 million tonnes of LNG from the United States by 2024. At current prices, this would be worth around $3.93billion.
Even if we assume that the value of LNG imports to Japan and South Korea will triple, this would still only amount to a combined total of $22 billion per year.
The volume of imports would increase to 36 million tons or 42% of 84.8 million tons exported by the United States in 2024.
TRADE DISRUPTIONS
As new LNG plants are brought online, U.S. exports will likely increase. However, its capacity could be overwhelmed by the demand of every country who has committed to a massive boost in its imports under trade agreements.
Trump claimed that the European Union had agreed to purchase $250 billion of U.S. Energy annually for three years. I found this figure delusional when considering the volumes required to achieve it.
It is not delusional to think that the majority of countries who have made deals with Trump, will make at least some effort in order to fulfill the terms. Even if all are aware that the amounts stated are unrealistic.
Even if you try to buy more LNG from the United States, or crude oil and coal there, it could disrupt global trade and cause price distortions.
If, for example, Japan tripled its LNG imports to the United States, it would be buying about 12 million fewer tons from existing suppliers like Australia and Qatar.
Japan will likely end up purchasing virtually no spot cargoes, and also be forced to sell term freights at discounted prices to other buyers.
There is a limit to the amount of U.S. Liquefied Natural Gas that Japanese utilities will buy.
It's also likely that the upper limit will be far below what Trump thinks it should.
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These are the views of the columnist, an author for.
(source: Reuters)
