China may buy $32.8b worth of US energy in 2020
Global Times


Aerial photo taken on Nov. 21, 2019 shows a vessel transporting liquefied natural gas (LNG) approaching a LNG wharf at Caofeidian port in Tangshan, north China's Hebei Province. (Photo: Xinhua)

It is possible that China will buy as much as $32.8 billion worth of US energy products in 2020, based on global market conditions and the bilateral relationship, a veteran expert told the Global Times on Wednesday.

If the relationship becomes friendlier, China could import more US energy products, which could be a breakthrough for US-China trade cooperation, Pang Guanglian, secretary general of the China Petroleum and Chemical Industry Federation (CPCIF), told the Global Times.

Based on the CPCIF's calculations, in 2020, China could buy $32.8 billion worth of US energy products - specifically, $23 billion of crude oil, $4 billion of liquefied natural gas (LNG), $1.5 billion of propane, $2.5 billion of ethylene and polyethylene, $1 billion of fertilizer and its feedstock, and $800 million of ethanol fuel. 

According to the China-US phase one trade deal, China promises to buy an additional $52.4 billion worth of US energy products - crude oil, LNG, refined products and coal - in 2020 and 2021, based on the 2017 level.

China imported $4.11 billion worth of these US energy products in 2019, and $6.66 billion in 2017. These figures indicate China is expected to buy $25.1 billion worth of US energy products in 2020, and $40.5 billion in 2021, Pang said.

China, the world's largest energy consumer, needs huge amounts of external energy. The US has swiftly increased its oil production over the past decade, and surging energy exports, no doubt, represent its strategy, Pang said.

Some analysts believe that buying so much more US energy is impractical and will indeed be challenging for China in the next few years. But others believe China does have the potential.

Chinese companies can apply for exemptions of import tariffs on US products including LNG and crude oil, from March 2, according to a document released by the Ministry of Finance.

Analysts think the tariff waiver policy could benefit Chinese importers wishing to buy US energy products.

Zhao Jun, general manager at the Strategic Development Department of Sinochem International Corp, told the Global Times that China will further increase imports of light hydrocarbons such as ethane and propane. The shale revolution has brought opportunities to the US for the production of ethane and propane.

Ethane is gradually preferred by the industry for ethylene production. Sources close to the National Development and Reform Commission (NDRC) told the Global Times that the industry has applied to build 23 ethane cracker projects for ethylene production. 

However, apart from market factors, how many projects will be approved is still related to the China-US relationship. The US is the world's top ethane exporter. If the China-US relationship becomes friendlier and US ethane capacity is further increased, more projects could be approved by the NRDC, Pang said.

Although it produced 20.52 million tons of ethylene in 2019, China still has a great deficiency. Data from the CPCIF reveal that China's annual capacity to make ethylene totaled 25.5 million tons in 2018, but consumption hit 50.1 million tons. In other words, China's ethylene equivalent self-sufficiency rate was just below 50 percent.

Recently, the COVID-19 has swept at least 150 countries and regions. US infections continue to rise, exceeding 50,000 cases.

Pang said the situation will impact China's imports and some business may be delayed. However, in the long run, energy products would be a breakthrough for China-US trade cooperation.

It remains uncertain how the China-US trade relationship will go, but it would be brighter in 2021, Zhao said.