The U.S. Department of Commerce announced on Wednesday (July 2) the lifting of restrictions on ethane exports to China, ending the control measures in place since May this year. China is the largest export market for U.S. ethane, with shipments accounting for half of the total exports, and this lifting of the ban is seen as a signal of thawing trade relations between the U.S. and China.
The U.S. Department of Commerce officially revoked the ethane export permit restrictions on companies such as Enterprise Products Partners and Energy Transfer, allowing the resumption of ethane exports to China. The Commerce Department has gradually lifted the related restrictions since last week, notifying companies that they can ship ethane to China, but unloading in China without permission is still prohibited.
In late May and early June, the Trump administration implemented export controls on various products imported from China in response to Beijing’s deliberate slowdown in rare earth metal supplies, impacting key industries in the U.S., such as the automotive industry. However, a framework agreement reached between the U.S. and China last week resolved the issues related to rare earth exports, leading to signs of easing trade relations.
According to shipping tracking data company Kpler, due to the impact of export permit restrictions, U.S. ethane shipments to China came to a complete halt in June, dropping from the daily average of around 257,000 barrels in May to zero.
Vortexa analyst Samantha Hartke stated that after the lifting of restrictions by the U.S., ethane exports will resume normal operations, with estimated July exports returning to the normal level of around 240,000 barrels per day.
In June this year, several oil tankers originally bound for China were forced to remain stranded along the U.S. Gulf Coast due to export restrictions. Some vessels even diverted to India in search of alternative markets. However, as of Wednesday, at least eight oil tankers have set sail again towards China.
Reuters noted that about half of the U.S. ethane exports are destined for China. The disruption in shipments not only affects U.S. producers but also impacts the raw material supply for Chinese petrochemical companies.
Due to the lower cost of U.S. ethane compared to naphtha, Chinese petrochemical industry tends to prefer using ethane as a raw material. Simultaneously, facing domestic oversupply, U.S. oil and natural gas producers also heavily rely on the Chinese market to absorb the excess of natural gas liquid products.