Fri, Dec 07, 2018 - Page 10 News List

US soy, gas unattractive to China, despite trade truce


China might be girding itself to buy more US gas and soybeans amid easing trade tensions, but the sums just do not add up at the moment.

US supplies would be uncompetitive or unneeded when shipped to China, based on current prices, shipping costs and other variable, so any resumption in purchases by the world’s biggest gas importer and the US’ top soy buyer is unlikely to be for economic reasons and might be a political gesture by Beijing to smooth relations with Washington.

US President Donald Trump’s claim this week, following a meeting with Chinese President Xi Jinping (習近平), that China would boost purchases was welcome news for US farmers and energy executives, who have seen their sales to China virtually vanish.

Chinese officials have been told to take necessary steps to rekindle trade, although it is not clear whether its recent import-stifling retaliatory tariffs would be cut.

However, China might not have much appetite for any additional gas right now beyond its baseload, long-term contracted volumes as its fuel tanks remain near capacity and amid forecasts for an unseasonably warm winter, traders surveyed by Bloomberg said.

And the best time of year to sell US soybeans to China has passed as South American harvests approach, according to Cargill Inc, one of the world’s top agricultural commodity traders.

North Asia’s gas buyers, which are well stocked for winter, are awaiting colder weather before increasing spot purchases, traders said over the past month.

A glut of supply and lower crude oil prices, to which most liquid natural gas (LNG) shipments are priced, have pushed the benchmark Japan/Korea LNG Marker to the lowest since July, a sign of weakening demand.

And even if China were to seek a short-term supply deal, it would be easier to turn to Australia or Malaysia. Oil-linked cargoes from those suppliers are currently cheaper than US shipments, which are priced off the Henry Hub marker that is hovering near a five-year high, calculations show.

“High shipping rates, a spike in Henry Hub-sourced LNG prices and a fall in Asian oil-linked benchmarks make it far less attractive to bring in US LNG to China — for now,” said Fauziah Marzuki, a Bloomberg New Energy Finance analyst in Singapore. “Atlantic basin supply will likely stay in the Atlantic.”

To be sure, if there was a directive to take more US gas, it would be possible for buyers to swap cargoes that they planned under existing long-term contracts with US shipments as “market liquidity easily enables that,” said Saul Kavonic, an analyst at Credit Suisse Group AG.

“The key question is regarding Chinese buyers’ appetite to underpin long-term US LNG contracts for new projects, which they may still be hesitant to do until the truce proves sustaining,” he said.

China’s most-recent trade data showed that it bought no LNG from the US in October, following Beijing’s move to impose a retaliatory 10 percent tariff — although the nation imported at least one US cargo last month and there is another still en route, vessel-tracking data compiled by Bloomberg showed.

Meanwhile, soybean imports from the US slumped 95 percent from a year earlier following the imposition of a 25 percent tariff and were replaced by a surge in Brazilian shipments.

It would not make much economic sense for China to boost US soybean imports now. US soybeans for next month were quoted at US$392 per tonne at Chinese ports on Monday, with freight and insurance costs included, but without the tariff, while Brazilian supply was a close US$407, the China National Grain & Oils Information Center said in a report this week.

This story has been viewed 1639 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top