China begins purchase of US fossil fuels again
China has begun buying U.S. liquefied petroleum gas (LPG) again after a hiatus of nearly 20 months as Beijing waived punitive tariffs to boost imports of U.S. goods as part of the Sino-U.S. Phase 1 trade deal, industry sources said.Perhaps this means the start of China becoming a buyer again in the US market. My recollection is that this was one of the main fuels they began trading with the US on.
Importers have rushed to apply for waivers for the 25% tariff to buy the fuel, a by-product from U.S. shale gas production, after Beijing started granting exemptions this month for nearly 700 U.S. goods.
About a dozen firms - including China Gas Holdings (0384.HK), a piped gas distributor and LPG trader, and Oriental Energy (002221.SZ), a manufacturer using LPG to make petrochemicals - have been granted the tariff waivers, according to two veteran LPG traders, an investment officer and analysts at IHS Markit.
With the exemptions, U.S. LPG is subject only to a 1% import duty, same as rival supplies from the Middle East.
China may have booked an estimated five U.S. cargoes totaling 220,000 tonnes so far, said a Beijing-based IHS analyst who also declined to be named as he is not authorized to speak to the media. This analyst said a slow rebound in Chinese petrochemical production following the coronavirus outbreak could hold back purchases.
The resumption of U.S. trade is set to weigh on prices of competing cargoes from Qatar and Saudi Arabia.
Benchmark U.S. spot butane prices BUT-USG in Mont Belvieu, Texas, have lost two-thirds of their values over the past month, dropping to their lowest since at least 1990 at $0.21 per U.S. gallon, primarily tracking the free-fall in oil prices.
That is equivalent to about $95 per tonne, and compares with April Asian LPG paper at $150 a tonne.