US LNG Exporters Face Headwinds as Chinese Demand Falters
A sustained slowdown in China's LNG appetite threatens to cool a market that boomed after Russia's invasion of Ukraine, posing risks for a wave of new US projects.
A boom for U.S. liquefied natural gas exporters built on Europe’s urgent need to replace Russian energy is now confronting a formidable headwind from the other side of the globe: a persistent slowdown in demand from China.
Reports indicate that China’s demand for LNG is poised to disappoint for a second consecutive year, casting a shadow over the global market. For major American producers like Cheniere Energy (NYSE: LNG) and Sempra (NYSE: SRE), a sustained downturn from the world’s largest buyer could pressure global gas prices and complicate the financial calculus for a massive wave of new export capacity planned for the U.S. Gulf Coast.
The dynamic marks a significant shift from the market’s trajectory over the past two years. U.S. LNG exports surged as Europe scrambled to fill its gas storage, successfully weaning itself off Russian pipeline supplies. This created a lucrative arbitrage for American suppliers and spurred final investment decisions on several multi-billion dollar export terminals.
Now, the market fundamentals are showing signs of softening. While Europe has successfully rebuilt its inventories, with gas storage levels targeting 90% capacity ahead of the winter, the demand engine that was expected to drive the next phase of growth is sputtering. China's economic sluggishness, coupled with a greater reliance on domestic production and increased pipeline gas from Russia, has curbed its appetite for LNG imports. Total Chinese LNG demand for 2025 is now projected to fall below 70 million tonnes, a significant reversal from pre-crisis growth expectations.
This softening demand picture is emerging just as U.S. export capacity is set to swell. The U.S. is on a path to increase its LNG export capacity by 75% by 2030, with facilities like Golden Pass LNG and Plaquemines LNG adding significant volume to the market. A prolonged period of weaker Chinese demand could mean more cargoes competing for a limited pool of buyers, potentially weighing on spot prices in both Asia (JKM) and Europe (TTF).
Shares of key U.S. LNG players have had strong runs, buoyed by long-term contracts that insulate them from short-term spot price volatility. Cheniere Energy, the nation's largest producer, has seen its stock price climb steadily over the past year. Sempra, a diversified utility with a significant and growing LNG infrastructure arm, has also traded near its 52-week high, reflecting investor confidence in the long-term energy transition.
However, the outlook for new projects could become more challenging. The next wave of U.S. LNG facilities relies on signing new long-term contracts to secure financing. A global market perceived as well-supplied, or even over-supplied, due to weak Asian demand could make it more difficult for developers to lock in the favorable terms needed to move forward.
For now, the U.S. LNG industry remains a critical supplier to global markets, particularly for European allies seeking energy security. But the cooling demand from China serves as a critical reminder that the path to future growth is not guaranteed. The sector's fortunes may now depend on whether a Chinese economic rebound or another geopolitical shock re-ignites the global scramble for natural gas.