US-China tariffs threaten ethane, propane trade; Chinese petchem producers set to seek exemption

Propane: China’s PDH sector under heavy pressure
Chinese propane dehydrogenation (PDH) plants, which convert propane into propylene, are already bracing for severe disruptions. More than 30 PDH units in China — which rely heavily on US LPG imports — have been operating at reduced rates of 70–75%. According to Reuters, further output cuts or even shutdowns for maintenance are imminent, as costs climb under Beijing’s newly increased tariffs.
About 35% of China’s propane imports come from the US and China imposed an 84% duty on US LPG, which is rich in propane. This move came as part of a broader retaliatory package following Washington’s hike of tariffs on Chinese goods to 125%. One East China-based executive described the atmosphere as a “harsh winter”, predicting that PDH plant utilization could fall below 50% in May.
While Chinese plants could shift to Middle Eastern propane, competition from markets like South Korea and India makes rerouting economically challenging. Sourcing propane from the Middle East will also raise freight costs, undermining the competitiveness. Plus, the export size of the Middle East is far less than the US, falling short of China’s demand.
Looking at the US perspective, China accounted for nearly 27% of total US LPG shipments in 2024, making it the largest customer. With this market under threat, the US may redirect its LPG exports to Europe, India and Southeast Asia to offset the loss. Meanwhile, propane prices in the US have dropped nearly 30% to $425 per ton, reflecting expectations of reduced Chinese demand.
Accordingly, some industry sources argue that China may have to make up for the deficit by purchasing US propane indirectly from other countries, while major traders report that Chinese producers are planning to file an appeal to exempt propane feedstock from the tariffs.
Ethane: Strategic dependence spurs appeal for exemption
The situation for ethane is no less precarious — and even more dependent on US supply. China has relied almost exclusively on the US for ethane imports, while more than 50% of US ethane went to China in 2024.
If Beijing proceeds to include ethane in its retaliatory tariffs, the implications could be severe. For US producers, the loss of their top ethane buyer could result in an oversupply, depressing domestic prices, delaying investment, and forcing some operators to curtail production.
For China, the consequences would be more nuanced. Although the country has increased ethane reliance, it still produces most of its ethylene from naphtha. According to Sinopec’s 2024 annual report, 70% of its 53 million tons/year ethylene capacity comes from naphtha. This diversification may give China short-term insulation, but it threatens the long-term competitiveness of its newer, ethane-fed plants.
This is why several Chinese petrochemical producers are now preparing to file formal appeals to Beijing, seeking exemptions for both ethane and propane feedstocks. They argue that the US is currently the only viable bulk supplier of ethane worldwide, and that replacing this supply would not only be costlier but also logistically unfeasible in the near term.
Winners and losers: A mixed outlook
For China:
- Risks: Cost spikes for downstream petrochemical products like polypropylene; operational disruptions across PDH and ethane-fed plants; limited alternatives for bulk propane and ethane sourcing.
- Strength: Some insulation via naphtha-based production; potential to reduce overcapacity through shutdowns or consolidation
For the US:
- Risks: Sudden loss of top export market for ethane and propane; expected domestic oversupply and falling prices; delayed or reduced investment in infrastructure and output expansion
- Strength: Opportunity to diversify export markets — especially in Southeast Asia, where countries like Malaysia, Vietnam, and Thailand are increasing cracker and PDH capacity. Vietnam, for example, has secured long-term agreements for US ethane imports ahead of its 2027 terminal launch.
Looking ahead
As trade tensions flare, the petrochemical sector has become a key battleground in the US-China dispute. The outcome of pending appeals by Chinese producers may determine whether key feedstocks are shielded from tariffs — and in turn, whether plants can continue to operate at economically viable levels. If exemptions are not granted, both China and the US risk damaging industries that have long been interdependent, accelerating structural shifts in global petrochemical trade.
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