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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 US President Donald Trump and Chinese President Xi Jinping agreed to further trade talks following a phone call between them on June 5, as per Chemweek.
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.
On June 4, CW reported 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 per gallon 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. Platts is part of S&P Global Commodity Insights.
BIS has not issued any public statements regarding the new license requirement and has not responded to queries from 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.”
Commodity Insights analysts expect ethane rejection to increase amid declining demand for ethane exports to China, which currently stands at around 250,000 b/d.
“The ethane export situation remains fluid, with some market participants expecting the export stoppage to resume sooner rather than later. This may contribute to the price volatility as well,” according to analysts.
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.
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 metric tons per year (MMt/y) of ethane-based ethylene capacity – almost all independently owned – that requires about 248,000 b/d of ethane feedstocks, according to Commodity Insights calculations. A 1 MMt/y ethylene plant requires about 62,000 b/d, or 1.33 MMt/y, of ethane. 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, however. 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 S&P Global’s 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.
mrchub.com