How U.S. Ethane Export Restrictions Impact China’s Petrochemical Sector

1. What Happened? U.S. Restrictions & Their Lift

• In late May to early June 2025, the U.S. imposed special licensing requirements on ethane exports to China, citing national security risks, including China’s military end-user ties

• The restrictions disrupted flows and delayed shipments, with some Very Large Ethane Carriers (VLECs) stranded off the Gulf Coast, and cargo volumes dropping significantly—from around 541,000 barrels/day in April to ~420,000 barrels/day in June.
• By early July, restrictions were eased: exporters were once again allowed to load ethane bound for China—but unloading in China still required additional licensing.

2. Impacts on U.S. Ethane Exporters

• Financial Hit: Energy Transfer reported an 11.5% drop in net income, while revenues came in below expectations.

• Reputational Damage: Both Energy Transfer and Enterprise Products Partners cited damage to the U.S. industry’s reliability and credibility—with Energy Transfer’s co-CEO calling it a “black eye” for the sector.
• Market Oversupply & Price Decline: With limited alternative export routes and infrastructure, U.S. domestic ethane supply ballooned, causing ethane prices to fall from about $0.25 to under $0.22 per gallon and creating a contango market.

3. Effect on China’s Petrochemical Industry

• Limited Vulnerability: U.S. ethane accounts for just 7–10% of China’s ethylene feedstock. China primarily relies on naphtha (≈69%), coal-to-olefins (≈16%), and is less dependent on ethane.

• Built-in Flexibility: Modern Chinese cracker facilities can readily switch to alternative feedstocks (naphtha, propane, butane) with minimal disruption. Analysts estimate that even a complete cessation of U.S. ethane would only reduce China’s ethylene output by around 5–6%

4. Wider Lessons & Strategic Implications

• Policy Backfire: Observers at CSIS argue that these restrictions were ill-conceived—hurting U.S. interests without meaningful strategic gain —and could signal unreliability to trading partners

• Shifted Trade Patterns: Energy export controls on ethane are part of a broader shift in trade negotiations, with U.S. policymakers now including items like jet engines and chip software in export control discussions.