LNG Export Growth Possibly Halted by Objected Shipbuilding Regulations in the U.S.
==============================================================================
The U.S. government has announced a new mandate that will require at least 1% of U.S. LNG (Liquefied Natural Gas) exports to be transported on vessels that are both U.S.-flagged and U.S.-built, with this figure gradually increasing to 15% by 2047.
This mandate, proposed by the U.S. Trade Representative (USTR), is part of a broader push to revive U.S. shipbuilding and reduce reliance on foreign-built LNG carriers. However, the new rule poses significant challenges due to the current lack of U.S. LNG carrier production capacity and the high costs involved.
The U.S. has not built LNG carriers since 1980, and rebuilding domestic shipyard capacity will take years. U.S.-built vessels are expected to cost two to four times more than similar vessels built in South Korea or China, due to higher labor costs and limited infrastructure.
With the U.S. being the world’s largest LNG exporter, even a 1% requirement translates into a need for multiple new vessels by 2029 (at least six), which could create shipping bottlenecks if the domestic industry cannot meet demand. Industry groups like the Center for Liquefied Natural Gas (CLNG) and the American Petroleum Institute (API) warn that the mandate might hamper export growth and cause the U.S. to lose market share.
However, the mandate is driven by strategic and industrial goals. The aim is to counter China's dominance in shipbuilding and to rebuild U.S. maritime industrial capacity. Partnerships like Hanwha Ocean's cross-border model—building LNG carriers in South Korea while certifying and finishing in the U.S. to meet regulatory criteria—offer a potential path forward to meet these requirements while scaling up domestic capabilities.
By 2035, companies like Hanwha Philly Shipyard aim to scale up production to 10 vessels annually, potentially creating thousands of U.S. jobs and enhancing energy security. However, regulatory definitions remain in flux, and geopolitical or regulatory changes could impact how the rules are implemented and their economic effects.
Experts suggest that without flexibility in defining "U.S.-built" vessels or phased implementation, the policy could stifle LNG exports just as global demand grows. By the end of the decade, up to six U.S.-built LNG carriers would be needed to comply with the 1% mandate. In 2023, the U.S. exported 1,396 LNG cargoes, but the global fleet includes only 792 LNG tankers.
The Trump Administration is pushing for a revival of U.S. shipbuilding, but the mandate's impact on the industry remains uncertain. Critics argue that meeting the requirements could be nearly impossible due to the lack of U.S. shipyard capacity, specialized labor, and supply chains. The CLNG and API have warned that the rules would penalize U.S. LNG exporters without effectively countering China's shipbuilding dominance.
In summary, while the U.S. mandate for LNG exports to use U.S.-flagged and U.S.-built vessels by 2029 and growing to 15% by 2047 is intended to stimulate domestic shipbuilding and enhance national security, it introduces cost and capacity challenges that could constrain the LNG export boom unless mitigated by industry innovation and cross-border partnerships.
- The new U.S. mandate for LNG exports could have a significant impact on global trade, as it may create shipping bottlenecks due to the need for multiple new vessels by 2029.
- The mandate's push for U.S.-built vessels could influence the supply chain dynamics of the LNG industry, potentially leading to higher costs due to the labor-intensive nature and limited infrastructure in U.S. domestic shipyards.
- The implementation of this mandate in the politics of the industry, finance, and general-news discourse will be essential in understanding its effects on U.S. LNG exports, global trade, and energy security.
