Latest News

Exports of US ethane to China now face a new licensing requirement

According to trade sources, and data on shipping, Chinese buyers of U.S.-produced ethane – a vital petrochemical raw material – face new uncertainty following a directive from the Commerce Department to exporters that they must obtain export licences for China.

Washington has ordered that a wide range of companies stop shipping products, such as ethane or butane, without a license to China and revoked the licences granted to certain suppliers.

This is the latest in a series of disruptions in Chinese purchases from the United States of ethane. According to the U.S. Energy Information Administration, U.S. ethane exports will reach a record 492,000 barrels / day by 2024 or almost half of U.S. imports.

China raised tariffs on U.S. imports to 125% in early last month but waived them for petrochemical companies that depend on the United States. China imports almost all of their ethane.

Kpler data shows that at least two Very Large Gas Carrier were waiting in U.S. ports this week to load ethane, while thirteen more tankers will be heading to or waiting off the U.S. Gulf Coast for about 460,000 metric tonnes of ethane to be loaded by June.

It will be a big issue if exports of ethane are stopped, said an ethane-importer from China who requested anonymity as he was not authorized to speak with the media.

We are watching with caution if the exporters will be able to obtain new export licenses in the near future.

Kpler data and LSEG showed that the VLGC Pacific Ineos Grenadadier, which was supposed to be loading ethane at Enterprise Products Partners' Morgan's Point Terminal at La Porte in Texas for Ineos, has been docked at this terminal since last Friday.

The data shows that Stl Qianjiang, anchored near Energy Transfer Nederland's terminal, is due to load ethane, for Chinese petrochemical company Satellite Chemical.

Satellite Chemical, Enterprise Energy Transfer, and Ineos have not responded to our requests for comments outside of office hours.

In a note, Julian Renton, analyst at East Daley Analytics said that "the market disruption could be immediately".

Sources in the trade say that Ineos may divert cargo to Europe. The company also purchases ethane from Europe for its plants.

Enterprise, one of the top handlers of butane and ethane, stated in a filing that it was evaluating their procedures and internal control and couldn't determine if they would be able get a license.

The traders said that Chinese operators may not be affected in the near future, since they have enough stocks.

Renton, of East Daley, said that if the restrictions remain in place, Chinese petrochemical facilities could be faced with critical feedstock shortages and projects could stall.

Chinese petrochemical companies use ethane to replace naphtha as a feedstock, while U.S. producers of oil and gas rely on China to purchase their natural gas liquids because domestic supply is greater than demand.

Satellite Chemical shares fell 3.1% Friday, while Wanhua Chemical stocks dropped 1.3%.

(source: Reuters)