According to trade sources and shipping data, the Commerce Department has informed exporters that they must now seek licenses to send ethane to China. This follows a broader order from Washington, reported by Reuters on Wednesday, instructing a wide range of companies to cease shipping goods, including ethane and butane, to China without a license, and revoking existing licenses for some suppliers.
This development introduces fresh instability into a trade flow that saw Chinese purchases of U.S. ethane reach a record 492,000 barrels per day in 2024, accounting for nearly half of total U.S. ethane exports, as per the U.S. Energy Information Administration. The export volume of ethane and propane from the U.S. to its top destinations in 2024 underscores the scale of this trade.
Just last month, China had increased levies on imports of U.S. goods to 125% but notably waived this tariff for petrochemical producers who are almost entirely reliant on the United States for their ethane imports. This previous concession highlights the strategic importance of U.S. ethane to Chinese industry.
The immediate impact of this new directive is already being felt. Kpler data indicates that at least two Very Large Gas Carriers (VLGCs) were waiting at U.S. ports this week to load ethane, while an additional 15 tankers are en route to, or awaiting off, the U.S. Gulf Coast, with plans to load approximately 284,000 bpd of ethane in June.
"It's going to be a major issue if all exports are suspended," stated a Chinese ethane importer, who preferred to remain anonymous due to not being authorized to speak to the media. "We are cautiously watching if exporters can obtain new export licences soon."
Specific examples of the disruption include the VLGC Pacific Ineos Grenadier, intended to load ethane for Ineos at Enterprise Products Partners' Morgan's Point terminal in La Porte, Texas, which has been docked there since last Friday, according to Kpler and LSEG data. Similarly, the Stl Qianjiang is currently anchored near Energy Transfer's Nederland terminal, slated to load ethane for Chinese petrochemical firm Satellite Chemical. Neither Enterprise, Energy Transfer, Ineos, nor Satellite Chemical could be immediately reached for comment outside of office hours.
Julian Renton, an analyst at East Daley Analytics, warned in a note that "the market disruption could be immediate." A trade source suggested that Ineos, which also procures ethane for its European plants, might divert its cargo there to mitigate the impact. Enterprise, a major handler of ethane and butane, has filed a statement indicating it is evaluating its procedures and internal controls and cannot yet determine its ability to obtain a license.
While traders suggest there might be a limited near-term impact on Chinese operators due to sufficient existing stocks, East Daley's Renton cautioned that if the restrictions persist, Chinese petrochemical plants could face critical feedstock shortages, potentially stalling new projects.
The economic implications are significant for both sides. Chinese petrochemical firms utilize ethane as a more cost-effective feedstock alternative to naphtha, while U.S. oil and gas producers rely on China as a major buyer for their natural gas liquids, as domestic supply often outstrips demand. The market reaction was swift, with shares of Chinese ethane importers Satellite Chemical down 3.1% on Friday, and Wanhua Chemical stock losing 1.3%. The coming weeks will be critical in determining the extent of the disruption and how both U.S. exporters and Chinese importers adapt to these new trade complexities.