China's LNG imports from Australia hit record high in April

China's LNG imports from Australia hit a record high in April, bolstered by robust industrial demand and Beijing's climate change pledges, and analysts expect they will remain strong despite souring relations between the two countries. 

Shipments from Australia to China totalled 3.06 million tons last month, up 10% from the same period last year and accounting for about 45% of China's total LNG imports, data from the General Administration of Customs showed.

The market share of Australian LNG in China has dropped to about 40% in the first four months this year from 46% in 2019, as exporters such as Russia and Indonesia made more spot trades, but Australia remains the biggest supplier of the clean fossil fuel to China.

China "indefinitely" suspended all activity under a China-Australia Strategic Economic Dialogue earlier this month, which has triggered fresh worries about key commodities trade between the two countries.

But there are little evidence of any restrictions on the LNG trade, even as Chinese trade sanctions hit various Australian goods including coal, copper concentrates and wine.

"State-owned enterprises purchase most of China's LNG imports and they do that mostly on contract. We estimate only 5% of current spot cargo imports is at risk," said ANZ analyst Daniel Hynes.

Despite increasing spot trades by second-tier gas importers, mostly city-gas firms, contracted cargoes still dominate LNG imports, making up more than 75%.

Beijing could look at changes in regulation or alternative sources for its LNG to reduce dependence on Australia for this transition fuel.

Wood Mackenzie analyst Gavin Thompson said Beijing could look to further impact Australian LNG exporters by introducing hefty import tariffs, though that could prove too painful for Chinese consumers or deter its buyers from signing new long-term contracts with Australian projects.

Chinese firms are in talks with Qatar, the biggest LNG exporter in the world, to partner in the expansion of North Field projects as an effort to diversify its gas sources.

But in the near-term, Australian LNG shipments to China would rise slightly from current levels, Hynes expects, as it is the only producer with enough spare capacity to meet the surging demand in China.

About 3.16 million tons of LNG are scheduled to arrive in China from Australia in May, while 2.05 million tons were heading to Chinese ports as of May 21, according to Refinitiv trade flows data.

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