Expanding petrochemicals production and uncertainty about imports of U.S. ethane and propane amid the trade row are expected to boost Chinese purchases of another petrochemical feedstock, naphtha, to a record high this year, traders and analysts tell Reuters.
Amid disrupted supply of cheap U.S. ethane and propane in the trade war, Chinese petrochemicals producers have boosted the use of naphtha in recent months, while uncertainties about the trade going forward are set to drive increased naphtha demand.
“With issues in imports of ethane and propane, there is a trust factor that has come into play when it comes to U.S. cargoes,” Pankaj Srivastava, senior vice president, commodity markets at Rystad Energy, told Reuters.
Earlier this month, the Trump Administration rescinded licensing requirements for U.S. exporters of ethane to China, paving the way to restoring the trade that was upended by the tariff row with Beijing.
For weeks before July 2, U.S. ethane exporters were required to submit an application for a validated license prior to the export, re-export, or transfer (in-country) of any ethane or butane products when a party to the transaction is located in China, or is a Chinese “military end user,” wherever located, except for certain eligible license exceptions.
China is a major market for U.S. ethane, a natural gas liquid extracted from wet natural gas during processing and is primarily used to produce ethylene.
The trade war with China in the past months has seen ethane and propane trade between the United States and China suffer significant disruption.
The disruption to ethane trade has prompted Chinese petrochemicals producers to buy more naphtha supplies from varied sources.
As a result, naphtha imports in the world’s top petrochemicals maker are expected to hit a record high of between 15 million tons and 17 million tons this year, up from 12 million tons in 2024, consultancies Rystad Energy, FGE, and JLC have estimated.
New petrochemicals capacities coming online in China this year and next will also support higher imports of naphtha, according to analysts.
By Tsvetana Paraskova for Oilprice.com
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