In accordance with the Announcement of the Tariff Commission of the State Council on the Imposition of Additional Tariffs on $16 Billion-Worth of American Imports, the Chinese government imposed an additional 25% tariff on about $16 billion-worth of American imports, effective from 12:01 PM on March 23. A wide range of chemicals are included in the list, including pure terephthalic acid, crude benzene, crude toluene, propylene, natural gas, etc.
Natural gas is one of the main raw materials for the manufacture of MDI. the combined production capacity for carbon monoxide, hydrogen and methanol accounts for 45.3% of the total capacity of domestic MDI units. Carbon monoxide, hydrogen and methanol are needed during the production process of MDI that use natural gas as the raw material. Then, will the additional tariff greatly affect the domestic gas supply? And will it have an indirect impact on the production of MDI?
China imported about $ 6.254 billion-worth of oil and gas from the United States in 2017. Of which $644 million worth are liquefied natural gas, which amounts to 153 million tons (2.1 billion cubic meters). However, LNG imports from the United States account for only about 4 percent of China's total LNG imports. Thus, the additional tariff on American GNL will not significantly affect domestic natural gas supply.
For all this, is the domestic LNG market calm?
As a matter of fact, natural gas supply is limited in China considering the domestic energy landscape, which features rich coal, oil starvation and shortage of natural gas. But the consumption of natural gas has been increasing as the government requires low- carbon and environmental-friendly production and living. As a result, natural gas imports have been increasing. It is reported that China's natural gas imports increased rapidly in the first half of this year. According to statistics from the General Administration of Customs of China, China's cumulative natural gas imports for the period from January to June reached 42,077 million tons, up 35.4% from the same period last year.
To ensure sufficient natural gas supply, the Executive Meeting of the State Council held on August 22 proposed the measures to deepen reform and thus promote the coordinated and stable development of the natural gas sector.
First, a diversified supply system in which domestic production is expanded and international cooperation is stable will be built. More efforts will be made to construct and connect pipe networks, gas storage, receiving stations and other facilities to ensure balanced supply and demand and orderly utilization.
Second, domestic exploration and development efforts will be stepped up, new mechanisms will be established to encourage all kinds of investors to participate in the exploration and development, and the market-based transfer of mining rights will be supported.
Third, the mechanisms for shaving of peak natural gas demand, emergency response and safety assurance will be improved. Plans will be formulated to ensure adequate natural gas supply in this winter and next spring. The new natural gas supply will first ensure the livelihood of urban residents and the replacement of bulk coal for heating in winter in areas with severe air pollution. Before the implementation of the "replacing coal with gas" policy, a contract shall be signed to ensure the gas source is in place. The strategy of differential pricing will be adopted to reduce demand during peak period while increase it during trough period.
It is believed that with the completion of the construction of China-Russia East-Route Natural Gas Pipeline, the landscape will be created that central Asia, Burma and Russia supply natural gases to China from northwest, southwest and northeast, respectively. At the same time, LNG supply from China’s eastern coast will also grow significantly. Thus, the four sources will promote the diversification of China's natural gas imports. Besides, the growth in domestic production will also become an important pillar of China’s natural gas supply.
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