Washington Halts Ethane Exports to China Over Security Concerns

According to a recent report from reuters, several ethane vessels loaded in the U.S. and initially headed for China are currently stuck around the Gulf Coast. This situation arose after the U.S. government mandated that exporters obtain licenses for shipping ethane to their primary market, China.

ethane is a notable export for the U.S., with nearly half of its shipments going to China. The current halt has led to a drop in ethane prices due to fears of oversupply domestically, which could negatively affect profits for major producers like Energy Transfer and Enterprise Products Partners.

These companies have expressed concerns about how these disruptions might impact their operations. the commerce Department has also turned down emergency requests from some vessels seeking permission to export ethane to China, further complicating matters.

For instance, the liberia-flagged STL Qianjiang was seen anchored off the Gulf Coast after loading at Energy Transfer’s terminal bound for Satellite Chemical in China. Meanwhile, another vessel named Pacific Ineos Grenadier had been redirected back towards Houston after initially setting sail towards its Chinese destination.The licensing requirement was communicated by the Commerce Department on June 3rd,prompting Energy Transfer’s response regarding their shipping plans. Other vessels that were scheduled for loading earlier this month are now idling near Houston and Port Arthur as they await clarity on their export status.

In late May, Enterprise Products Partners received similar notifications about licence requirements and subsequent denials of emergency requests concerning three cargoes totaling approximately 2.2 million barrels destined for China—an issue they have 20 days to address before it becomes final.

An executive from a ship brokering firm noted that with these restrictions on exports, many ships are left adrift or moving aimlessly while hoping negotiations between U.S. and Chinese officials yield positive results.

U.S. production of ethane reached an remarkable 2.8 million barrels per day (bpd) this year and is projected to rise even further next year as international demand continues despite steady domestic consumption levels.

Last year saw record exports at around 492,000 bpd; notably, nearly half went directly to China—a crucial market given that alternatives remain limited at present according to industry experts like Uday Turaga from ADI Analytics who mentioned potential discounts on distressed cargoes due to these circumstances.

The Bureau of Industry and Security cited concerns over military applications as part of its rationale behind restricting exports—an issue both companies acknowledged in their filings with regulators.

Chinese petrochemical firms rely heavily on ethane because it serves as an economical feedstock compared with naphtha; meanwhile American producers find themselves needing buyers abroad as local supply outstrips demand considerably.