China Walks Away: U.S. LNG Growth Plans Unravel as Commerce Warfare Escalates

Join CleanTechnica’s Weekly Substack for Zach and Scott’s in-depth analyses and excessive stage summaries, join our every day publication, and/or observe us on Google Information!

Final Up to date on: 18th April 2025, 12:19 pm

China has simply suspended all LNG imports from america. No warning, no phasedown, simply an obvious state directive that Chinese language patrons, together with the nationwide oil firms, had been now not to signal, raise, or obtain U.S. liquefied pure fuel. The choice comes within the wake of a quickly escalating commerce conflict, reignited by a second Trump presidency that wasted no time imposing steep new tariffs on Chinese language know-how and industrial items. The result’s a gaping gap within the U.S. LNG export market, one which undermines years of funding assumptions and exposes the rising fragility of fossil gas infrastructure in a altering geopolitical panorama.

The China–U.S. LNG relationship wasn’t all the time adversarial. In reality, over the previous decade, it was one of many extra dynamic parts of worldwide fuel commerce. After the U.S. started exporting LNG from the Decrease 48 states in 2016, China rapidly emerged as a high buyer. That yr, U.S. LNG shipments to China totaled roughly 0.35 million tonnes — small, however vital for a market simply opening. By 2017, the determine had surged to over 2 million tonnes each year (MTPA), with China accounting for practically 15% of all U.S. LNG exports. It seemed like the beginning of an extended and worthwhile relationship.

However the commerce conflict launched in 2018 by the primary Trump administration slammed on the brakes. China imposed retaliatory tariffs on U.S. LNG — first 10%, then 25% — and imports plummeted to close zero by 2019. Solely the Part One commerce settlement in early 2020 restarted flows. That yr, U.S. LNG volumes to China rebounded to over 4 million tonnes, rising to a report 9.3 MTPA in 2021. In that banner yr, China represented over 12% of complete U.S. LNG exports, and the offers had been value over $3.4 billion in nominal {dollars}. Dozens of long-term contracts had been signed, and U.S. mission builders counted on China to underwrite future growth.

That religion proved misplaced. By 2022, U.S. LNG flows to China dropped sharply as Europe, reeling from Russia’s conflict in Ukraine, bid aggressively on spot cargoes. Chinese language imports hovered round 2 MTPA in 2022 and rose modestly in 2023, however by no means recovered to their 2021 peak. Now, with Beijing’s abrupt suspension of U.S. LNG, the connection has collapsed solely. Contracts are frozen. Cargoes already loaded are being diverted. And any terminal with offtake publicity to Chinese language patrons is dealing with the actual prospect of default or renegotiation. In just some weeks, a decade of progress has been reversed.

The lack of China as a buyer comes because the U.S. LNG business continues to be navigating Europe’s shifting function. Europe grew to become the biggest vacation spot for U.S. LNG virtually in a single day after 2022, when Russian pipeline fuel was lower off and European nations scrambled for replacements. U.S. export volumes to Europe surged to over 60% of complete shipments in early 2023, with nations like France, the Netherlands, and the UK counting on American LNG to maintain industries operating and houses heated.

However that surge was by no means meant to final. Europe’s local weather coverage has been express: cut back fossil gas dependence throughout all sectors. The European Union’s Match for 55 package deal and REPowerEU technique purpose to chop pure fuel use by as a lot as 40% by 2030. Warmth pumps, constructing retrofits, renewables, and grid integration are all scaling quicker than anticipated. Trade is electrifying. Hydrogen, whereas principally hype, has served its function as a decarbonization catalyst in coverage debates. As early as 2024, forward-looking European utilities started declining 20-year LNG offers, as a substitute favoring short-term contracts or portfolio purchases. The message was clear: European fuel demand was peaking and would quickly be in structural decline.

That left the U.S. LNG sector reliant on a fragile two-legged stool: China and Europe. And now one leg has been kicked out from below it.

Over 20 proposed U.S. LNG terminals are in numerous levels of improvement. Some, like Enterprise World’s CP2, Sempra’s Port Arthur, and NextDecade’s Rio Grande, have already secured partial financing or begun early building. Others stay within the allowing and contracting section, awaiting remaining funding choice (FID). Throughout the Gulf Coast, the imaginative and prescient has been constant: construct extra capability, serve rising Asian demand, and use versatile vacation spot clauses to capitalize on European worth spikes.

In a sequence of publications over the previous three years, I’ve argued that this growth was speculative at finest. The assumptions behind the subsequent 100 MTPA of capability had been shaky: that world demand would proceed rising, that geopolitics would stay secure, that carbon pricing wouldn’t chunk, and that markets like China and India would purchase regardless of the U.S. was promoting. I’ve identified that the majority of those new terminals had been being justified on the again of long-term contracts that wouldn’t maintain as much as scrutiny, and {that a} vital share of deliberate capability risked changing into stranded as demand plateaued or declined. Now, these warnings are materializing.

The implications for these terminals are extreme. With out Chinese language offtake, practically a 3rd of the amount dedicated to future U.S. tasks has evaporated. Some builders will try to resell this capability, however few patrons have China’s urge for food, credit score profile, or willingness to signal 20-year offers. With Europe capping long-term fuel infrastructure progress and getting ready for a long-term decline in fossil imports, the second fallback market is shrinking quick. Tasks which have but to succeed in FID could also be shelved solely. Banks and institutional traders will demand extra conservative projections. Danger premiums will rise. Insurance coverage could turn into tougher to acquire. Terminal utilization charges will fall in need of modeled expectations, and the whole economics of Gulf Coast LNG must be revisited.

There’ll nonetheless be demand for U.S. LNG, however not on the scale the business was betting on. Versatile cargoes will discover a residence in smaller markets. Portfolio gamers like Shell and Whole will optimize flows. However the dream of changing into the world’s LNG pump jack, delivering low-cost fuel to a hungry world effectively into the 2040s, is now dissolving because the business awakes to the dawning new actuality. The longer term isn’t infinite progress. It’s managed decline, sensible optimization, and fewer new megaprojects.

Every massive U.S. LNG export terminal consumes between 3 and eight terawatt-hours (TWh) of vitality per yr, principally within the type of pure fuel used to energy compression and liquefaction. That’s roughly equal to the annual electrical energy consumption of a mid-sized U.S. metropolis. In greenhouse fuel phrases, a completely operational LNG terminal can emit over 2 million tonnes of CO₂ yearly, not together with downstream emissions from combustion or upstream methane leakage.

Sarcastically, Trump’s commerce conflict — by freezing China-bound shipments and halting new terminal progress — could have delivered an sudden local weather silver lining: a considerable brake on future emissions from fossil fuel infrastructure that might in any other case lock in a long time of high-carbon export exercise. In attempting to punish a geopolitical rival, he has by accident slowed the growth of one among America’s most emissions-intensive vitality sectors.

The ultimate irony is political. U.S. oil and fuel executives spent closely in the course of the 2024 election cycle, as soon as once more backing Trump within the hopes of favorable insurance policies, looser rules, and accelerated fossil gas exports. Billions had been spent on lobbying, marketing campaign donations, and pleasant media to amplify the message that fossil fuels meant freedom and prosperity.

And what did they get in return? A commerce conflict that shuttered their second-largest LNG market, destabilized long-term provide relationships, and despatched shockwaves by way of world vitality finance. The approval ban for brand new terminals could have been lifted, however that doesn’t imply any might be constructed. Similar to in 2019, the business helped purchase the presidency, and as soon as once more, bought burned by the very man they put in workplace.