The latest US port fees on Chinese vessel owners are expected to reshuffle the fleet.
The United States Trade Representative has declared the implementation of supplementary port fees specifically targeting Chinese vessel owners and operators engaged in loading activities within US ports.
This measure signifies a potential increase in the operational costs for these entities.
US policy
Notably, the directive includes a provision that may exempt LNG vessels from these additional fees for a significant portion of the current year, suggesting a differentiated approach based on cargo type.
The rationale behind this new policy and its potential economic and geopolitical ramifications remains subject to further analysis.
This development could also prompt adjustments in shipping routes, pricing strategies, and supply chain management for affected businesses.
The imposition of additional port fees on LNG carriers could lead to Chinese vessels choosing routes that avoid US LNG facilities, according to Rystad Energy.
Consequently, the Atlantic region might experience a progressive decrease in shipping options compared to Asia.
PetroChina recorded the highest volume of loadings among Chinese charterers involved in US-LNG projects in 2024.
“While US port fee hikes may spare LNG vessels for now, future cost pressures could divert Chinese ships away from the Atlantic Basin,” Masanori Odaka, Rystad Energy’s senior analyst, said in an emailed commentary.
Meanwhile, Asian prices dipped to around $12 per MMBtu for June, and European benchmarks fell amid mild weather and soft demand, shifting the economics in favor of Asia-bound cargoes.
Asia
Asian LNG spot prices for June delivery, which became the front-month benchmark on April 16, experienced a decline to approximately $12 per million British thermal units (MMBtu), Rystad Energy said.
This price decrease occurred despite multiple unplanned production shutdowns and operational issues reported across various LNG facilities in the Asian region.
These outages typically exert upward pressure on prices due to reduced supply availability.
However, the price drop suggests that other market factors, such as potentially lower demand or sufficient existing inventories, are currently outweighing the impact of these supply disruptions.
Furthermore, the bearish sentiment extended into the near-term futures market, as derivative contracts for LNG deliveries in both July and August also registered substantial week-on-week losses.
Specifically, July derivatives fell by 3.5%, while August derivatives experienced an even larger decline of 3.7% compared to the previous week, indicating a broader expectation of continued price weakness in the Asian LNG market over the immediate summer months.
Operations below capacity
Chevron’s Wheatstone LNG facility was experiencing a one-week planned maintenance on one of its trains, according to Rystad.
Simultaneously, Malaysia LNG’s Satu and Dua projects are operating below their full capacity due to ongoing technical issues.
Petronas, the operator, has been working to restore full production since April 18.
Japanese major power utilities’ LNG inventories decreased by 1% to 2.11 million tonnes on April 20, following a stable period at 2.13 million tonnes between April 6 and April 13, according to Rystad.
These inventory levels are slightly lower, by 2-3%, than the 2.18 million tonnes recorded at the end of April 2024.
However, they remain close to the 2020-2024 end-of-April average of 2.14 million tonnes.
Europe
As of April 23, Dutch TTF prices experienced a weekly decrease of 3.3%, reaching $11.3 per MMBtu.
Similarly, European LNG prices saw a week-on-week decline of 4.5%, settling at approximately $10.8 per MMBtu.
This was despite scheduled maintenance at Snohvit LNG and a 1.5% weekly decrease in Norwegian pipeline flows to 330.1 million cubic meters, Rystad said.
Major demand hubs in Europe are expected to experience higher-than-usual temperatures until the first week of May, according to forecasts.
“Sellers with US-origin LNG may consider sending their cargoes to Asia as economics have improved for delivery to the Asia-Pacific region, though this is subject to change during the long voyage from US Gulf Coast to Asia around the Cape of Good Hope route,” Rystad said.
The post US port fees threaten to reshape global LNG shipping routes appeared first on Invezz