China has waived a short-lived 125% tariff on U.S. ethane imports, but American shipments to China could be hindered by a U.S. requirement of export licenses.
Ethane, a natural gas liquid primarily extracted from raw natural gas during processing, is mainly used as a feedstock for ethylene production, one of the most important building blocks in the petrochemical industry.
China has waived a 125% tariff on U.S. ethane imports it had levied in early April.
The tariff removal led EIA to expect strong growth in U.S. ethane production and exports. EIA expects the United States to produce nearly 3 million barrels per day of ethane this year and slightly more than 3 million barrels per day of ethane next year, up from 2.8 million barrels per day in 2024.
Most of this growth in U.S. ethane production will be exported to supply growing international demand, the Energy Information Administration says.
However, the U.S. Department of Commerce is now notifying U.S. exporters that they need to apply for export licenses to export ethane and butane to China.
Enterprise Products Partners, one of the biggest exporters of ethane and butane via its terminals, warned on Thursday it “cannot determine whether the Partnership will be able to successfully obtain any required BIS license in a timely manner, or at all, for applicable transactions involving Covered Ethane and Butane Products.”
Under a notice from the Bureau of Industry and Security (BIS), U.S. exporters, including Enterprise Products Partners, are 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, and the need for export licenses could slow the trade in the coming weeks and months until exporters obtain such licenses.
Yet, U.S. ethane production and exports are set to benefit from petrochemical firms in Asia shifting feedstock from naphtha to the cheaper ethane as chemicals margins shrink.
By Tsvetana Paraskova for Oilprice.com
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