The US LNG industry warned that new Trump administration protectionist measures targeting Chinese ships could threaten the US’ future status as the world’s top LNG supplier by requiring that a share of exports be transported on US ships starting in three years.
The final plan, which the US Trade Representative released April 17, will subject Chinese ship operators and Chinese-built ships to fees when they enter a US port— albeit lower fees than were first proposed. LNG tankers will not be subject to the fees, but the USTR declined to exempt LNG shipping and LNG ships from the new policy entirely.
Instead, the USTR adopted plans to phase in a requirement that LNG exports be transported on US-built, US-flagged, and US-operated ships. The Center for Liquefied Natural Gas, the leading trade group, said the measures would risk destabilizing long-term LNG contracts, raise costs for global buyers, and threaten the position of the US as the world’s top LNG supplier.
“While the Center for LNG supports the administration’s efforts to counteract China’s distortive practices in shipbuilding and logistics, the proposed maritime restrictions—particularly the requirement to transport US LNG on US-built and flagged vessels—are simply not feasible,” Charlie Riedl, executive director of the Center for LNG, said in a statement.
“There are no such vessels in existence today, and building them would take decades, making compliance impossible for the industry,” Riedl added.
Under the plan, US-flagged and operated ships would need to ship 1% of LNG exports starting in 2028. After that, the requirement for shipments to be on US-built, flagged, and operated ships would start at 1% in 2029, based on total exports of the prior calendar year. Then, the requirement ratchets up over time, climbing to 2% in April 2031 and continuing to rise as high as 15% in April 2047.
The immediate effects of the policy on the US LNG trade will be limited, said Andres Rojas, LNG analyst with S&P Global Commodity Insights. But the next phase, starting in three years, will create more challenges.
“A whole new shipbuilding sector needs to develop essentially overnight,” Rojas said.
The Center for LNG had argued for a full exemption. While the USTR did not grant one, the final policy included some concessions. A shipowner can get an extension, for example, if they can show they have an LNG ship being built in the US once the requirements go into effect and the owner takes delivery within three years.
Cost, timing challenges
Multiple analysts, however, expressed skepticism that the new policy would result in LNG tankers getting built in the US in time, citing higher costs compared with overseas shipyards and other factors.
“To me, it seems literally impossible to even build one LNG tanker in the [US] by 2029. Full stop,” Ira Joseph, global fellow at Columbia University’s Center on Global Energy Policy, said in an interview. “The yards don’t have the experience or the technology right now to do it.”
Joseph suggested the shift would be “revolutionary” for the sector, particularly if applied retroactively for projects already in operation.
Chinese-built ships make up around 7% of the global LNG tanker fleet currently in operation, Commodity Insights data showed, but Chinese shipbuilding yards have been expanding their market share, accounting for roughly 28% of LNG tankers on order.
The USTR policy rollout stems from an investigation into Chinese dominance in the shipping and shipbuilding sector launched by the Biden administration in April 2024 under Section 301 of the US Trade Act of 1974.
Steel trade unions and other labor organizations praised the action, but some exporters raised concerns about the practicality and costs associated with shifting to US-built ships as quickly as envisioned in the USTR approach.
ClearView Energy Partners described the USTR’s final action as “more flexible” than the Feb. 21 proposal because new fees on shipments of Chinese ships come with a 180-day grace period and because of the phase-in on LNG ship provisions.
Portions of the USTR rulemaking “struck us as an effort to isolate Chinese operators and shipowners while minimizing burdens for US entities and others who currently rely on Chinese-built ships,” ClearView analysts said in a note to clients.
One possible sticking point for LNG developers is a provision that would allow the USTR to suspend export licenses for noncompliance with new restrictions.
“It currently seems unlikely that this administration would be inclined to do so on the basis of insufficient US-built LNG tankers,” ClearView analysts said.
Source: Platts
