According to trade sources and shipping data, the US Department of Commerce has requested American exporters to apply for licenses before exporting ethane to China, which could disrupt the transportation of petrochemical raw material ethane to China. The US Trade Representative said on Friday (May 30) that China violated its commitment to restore key mineral exports.
Most of China’s ethane imports from petrochemical producers rely on the US, purchasing about half of the total US ethane exports.
The US government has reportedly ordered numerous companies to stop exporting petrochemical raw materials to China without a permit and has revoked permits already granted to some suppliers. These goods include ethane and butane gas.
If US exporters cannot quickly obtain licenses, they will need to look for other buyers. For Chinese petrochemical producers, finding alternative sources of ethane or turning to other more expensive petrochemical raw materials like naphtha will increase costs.
According to data from the US Energy Information Administration, China imported a record daily average of 230,000 barrels of ethane from the US last year. Ethane is a byproduct of oil and natural gas production, mainly used in plastic manufacturing.
Data from analytics firm Kpler shows that at least two very large gas carriers (VLGCs) are waiting to load ethane in US ports this week, with another 15 oil tankers en route or waiting along the US Gulf Coast planning to load around 284,000 barrels per day of ethane in June.
“If all exports are suspended, this will be a significant problem,” said a Chinese ethane importer who wished to remain anonymous and declined media interviews.
“We are closely monitoring whether exporters can quickly obtain new export permits.”
US President Trump said on Friday that China had violated an agreement with the US to jointly lift key mining tariffs and trade restrictions, hinting at taking tougher action against Beijing.
US Trade Representative Jamieson Greer told CNBC that China has yet to resume key mineral exports as required by the Geneva Agreement. He said, “The progress of the Chinese (Communist) in complying with the agreement has been slow, which is completely unacceptable and must be addressed.”
Earlier this week, Reuters reported that the US had ordered multiple companies to stop exporting goods to China without licenses and revoked some existing export permits. The affected products reportedly include semiconductor design software and chemicals, butane and ethane, machine tools, and aviation equipment.
Chinese Embassy in Washington spokesman Liu Pengyu said that since the Geneva talks, China has been communicating with the US on trade issues, but is concerned about US export control measures.
A US official familiar with the negotiations told Reuters that the Geneva meetings only discussed tariffs and non-tariff countermeasures by China, with US export controls not included in the agreement.
According to Kpler’s shipping tracking data, petrochemical producer Ineos had planned to load ethane onto the “VLGC Pacific Ineos Grenadier” from the Enterprise Products Partners dock in Morgan’s Point, Texas on May 24 for export to China. According to the London Stock Exchange tracking data, the vessel docked on May 24 but has not yet been loaded.
The largest ethane exporter Enterprise said in a regulatory filing on Thursday that it had received a letter from the US Department of Commerce on May 23 requesting a license to export ethane and butane to China. The company said it is assessing procedures and internal controls and cannot confirm if it can obtain the permit.
Enterprise and Ineos did not respond to Reuters’ requests for comment. The US Department of Commerce also did not immediately respond to requests for comment.
A trade source said that if Ineos cannot ship goods to China, the company may redirect the cargo to a factory in Europe.
Data shows that the next ship expected to carry ethane exports to China is the “Stl Qianjian”, currently moored near Energy Transfer’s Dutch dock. The vessel plans to transport ethane to China Petrochemical Company Satellite Chemical.
Energy Transfer owns one of the largest portfolios of crude oil, natural gas, and natural gas liquid assets in the US, primarily located in Texas and the central continental US region. Energy Transfer has not responded to requests for comment from Reuters, and Satellite Chemical could not be contacted for comment.
“Market disruptions could happen immediately,” analyst Julian Renton of East Daley Analytics said in a report.
Renton stated that if restrictions continue, Chinese petrochemical factories could face severe raw material shortages, leading to project delays.
On Friday, Enterprise’s stock price fell 1.12%, and Energy Transfer’s share price dropped 1.4%.
Earlier on Friday, ethane importer Satellite Chemical saw a 3.1% drop in stock price, while Wanhua Chemical’s shares fell 1.3%.
“We will continue to work with the government to ensure these vital trade flows are not unnecessarily obstructed,” said Dustin Meyer, Senior Vice President of Policy, Economics, and Regulatory Affairs at the American Petroleum Institute (API) Trade Group.