Chinese importers optimistic on US ethane flows following Trump-Xi phone call

Chinese ethylene makers that use imported US ethane are more optimistic on the future for trade flows of the feedstock between the two countries after President Trump and his Chinese counterpart Xi Jinping agreed to further trade talks following their phone call June 5.

The call was the first time the leaders had spoken since Jan. 17, amid escalating trade tensions and retaliatory tariffs between the world's two top economies, even after both sides agreed to a 90-day pause on tariffs in early May.

Platts reported June 5 that neither of the US's two ethane exporters, Energy Transfer and Enterprise Products Partners, would be allowed to load ethane for shipment to China without first securing a license from the Bureau of Industry and Security (BIS), part of the US Department of Commerce.

The two companies were denied emergency authorization to load China-bound ethane shipments pending their license applications, with US Gulf Coast ethane prices falling to seven-month lows amid the block.

Following the call between the leaders, however, prices rebounded with Platts assessing ethane at the Enterprise terminal in Mont Belvieu, Texas, at 21 cents/gal on June 5 , up 2.25 cents/gal on the day from 18.75 cents/gal. The June 4 assessment was the lowest since Nov. 8, 2024.

BIS has not issued any public statements regarding the new license requirement and has not responded to queries from S&P Global Commodity Insights.

Industry sources told Platts June 6 that Chinese importers have provided documents to their US ethane suppliers relevant for the license applications, while some expressed optimism for a resolution going forward.

"Resuming a conversation between the presidents helps to address the ethane trade issue," a Singapore-based procurement manager with a Chinese chemicals firm told Platts.

Others were waiting to see further developments, but noted that the block on trade flows was more of a concern for the US exporters than for Chinese ethylene makers.

"We are assessing the impact of the US's new policy and the possible solutions," a source from a Shandong-based plant told Platts, adding: "The US suppliers are more anxious than we are, as we have flexibility in feedstocks."

According to the US Energy Information Administration, ethane production in the US rose to a record 2.83 million b/d in 2024 with exports hitting 492,000 b/d, of which about 46% went to China.

Imports surge

Ethane-fed chemical plants in China have meanwhile significantly increased their June-delivery cargoes, likely reaching a record high, following Beijing's decision to exempt US ethane from additional tariffs in late April/early May.

China has about 4 million mt/year of ethane-based ethylene capacity – almost all independently owned – that requires about 248,000 b/d of ethane feedstocks, according to Commodity Insights calculations. The capacity is spread across five plants in eastern China's Jiangsu, Zhejiang and Shandong provinces.

Only the Jiangsu-based Satellite Chemical fully relies on imported ethane. Although Satellite Chemical's key supplier, Energy Transfer, is unable to ship ethane to China until its license is approved, sources close to the company told Platts that its units are currently running at normal rates, with the company managing to ship out two Very Large Ethane Carriers to China before exports were blocked by the US government.

The VLEC Gas Jessamine, which arrived at Energy Transfer's Orbit terminal in Texas on May 22, departed on May 23 with a cargo of ethane bound for Satellite Chemical's Lianyungang, according to Commodities at Sea data, while the Seri Elbert arrived at Orbit on May 26 and departed for Lianyungang on May 28.

US ethane volumes to Jiangsu are expected to more than double month over month to 326,300 b/d in June, which is also a 72% year over year increase, CAS data showed.

More flexibility

Other plants, meanwhile, have more flexibility in feedstocks.

The Ningbo Huatai Shengfu Polymeric Material and SP Chemical in Zhejiang province can process both ethane and propane. For instance, Ningbo Huatai Shengfu Polymeric Material sources ethane from the neighbouring Daxie Petrochemical, besides importing from the US.

The Zhejiang-based Sanjiang Chemical and the Shandong-based Wanhua Chemical can also crack naphtha on top of ethane and propane, industry sources added.

Wanhua Chemical has just shut its 1 million mt/year propane-fed cracker on June 3 to reconfigure it into an ethane-fed unit, while its 1.2 million mt/year naphtha/ethane-fed cracker is operating at usual rates.

Sources close to these plants said they would adjust their feedstock slate and production plan in line with cost movement to limit the impact from ethane supplies.

US exports set to grow

US ethane exports are likely to continue growing over the next two years as several export projects are under development in Texas.

Energy Transfer Partners plans to add another 250,000 b/d of capacity at its Nederland terminal, while Enterprise Products Partners' Neches River terminal is planning to introduce a dedicated ethane refrigeration train with a 120,000 b/d capacity and an ethane tank capable of holding 900,000 barrels in the latter half of this year, according to S&P Global Commodity Insights' NGL Markets Infrastructure Update, published in March.

The Singapore-based procurement manager said that he held a bearish outlook for the price of the US ethane when the expansions come online, noting also that if there are export restrictions to China, US suppliers would have to find other outlets overseas for their growing supply.