*

China's imports of US ethane could grow over 20% this

year,

analysts forecast

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Wanted: more US export capacity, ethane tankers

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Ethane in demand due to much higher margins than other

feedstock

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China buys nearly half of US exports, tariff hikes seen

unlikely

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Demand growth and constrained export capacity to support

market

By Siyi Liu and Florence Tan

SINGAPORE, Feb 6 (Reuters) - Despite a growing trade war

between Washington and Beijing, China's ethane imports from the

U.S. are set to surge this year as big petrochemical producers

battling shrinking profits switch to the cheaper feedstock

flowing from the U.S. shale gas boom.

Companies including Satellite Chemical, China

Sanjiang Fine Chemical, and Wanhua Chemical Group

are investing more than $16 billion to build

crackers, upgrade plants, expand storage, and construct Very

Large Ethane Carriers to ship the liquefied gas.

U.S. export capacity and a lack of tankers are the two

factors holding back growth in the ethane trade between the

world's two biggest economies. Nearly all of China's ethane

imports come from the U.S.

Forecasts from three analysts for China's ethane imports

in 2025 range between 6.3 million and 8.2 million metric tons,

which they estimate would amount to an increase of between 9%

and 34%. There is no official data publicly available on ethane

imports.

To meet the rising export demand, U.S. pipeline network

operators Energy Transfer ( ET ) and Enterprise Products

Partners ( EPD ) are expanding capacity at their terminals.

"The bottleneck is U.S. exports right now," said Armaan

Ashraf, head of natural gas liquids at consultancy FGE.

China buys nearly half of U.S. ethane exports, according to

the U.S. Energy Information Administration, which sees U.S. net

ethane exports rising 6% to 520,000 barrels per day (11.2

million tons) in 2025, it said in an October report. China is

expected to take most of that increase, an EIA analyst said.

In competition with China, Thailand plans to buy more

U.S. ethane to reduce its trade deficit with the United States,

while Siam Cement Group is re-configuring its new Long

Son cracker in Vietnam to use the cheaper feedstock. Taiwan's

Formosa Petrochemical, the region's largest naphtha

importer, is also studying importing U.S. ethane for its

crackers, its spokesperson KY Lin told Reuters.

The growing demand and constrained export capacity will

result in a tight ethane market from 2026, said Wang Yan, an

analyst at commodities intelligence firm ICIS.

NEW CRACKERS AND SHIPS

Between 2024 and 2026, Chinese companies plan to add at

least 7.7 million tons per year (tpy) of capacity to process

ethane and other gas liquids, company filings show, as they look

to take advantage of the cheaper feedstock.

They need to make the switch to improve their returns.

Crackers in China processing ethane can reap $300-$500 per ton

of ethylene produced, beating the profit margins at plants

processing naphtha, said Cheryl Liu, an analyst at consultancy

Energy Aspects.

Sanjiang Chemical said in its first-half 2024 financial

report that the start-up of its mixed-feed cracker cut its costs

by a fifth and flipped its loss-making ethylene oxide/ethylene

glycol production to profit.

Along with plant upgrades, new shipping capacity is

required. For every one-million tons per year in cracking

capacity, at least six dedicated VLECs are needed to ship the

feedstock, Ashraf said.

A VLEC costs $160 million-$170 million and takes three years

to build, said executives at Japan's IINO Lines. The operator

has leased its first two VLECs to be completed this year to

privately-owned UK group Ineos to send U.S. ethane to China.

Wanhua Chemical, which has three VLECs, will add another two

to three tankers by the end of the year, said a source familiar

with the matter who declined to be named as he is not authorised

to speak to media.

"The main constraint is shipping," he said, as Chinese

shipyards are fully booked over the next few years.

He estimated there are 29 VLECs in service and expects

China's demand growth to track new ships coming on.

"There is lots of demand, but lots of vessels also coming.

And since the main importers will be China and exporter (is)

U.S., there is the political issue between the U.S. and China.

So we have to be careful of that," the LNG team of IINO Kaiun

Kaisha ( IIKKF ) said in an email response to Reuters.

However, some analysts and Enterprise CEO Jim Teague

played down the likelihood of ethane being affected by the

tit-for-tat tariffs between Beijing and Washington, as China

would prefer to keep feedstock cheap to support industry.

"The whole segment is not doing very well. There are always

other sectors that they can tap down on when it comes to trade

war," said FGE's Ashraf.

China lowered its import tariff for ethane in 2025 to 1%

from the 2% in 2024.

Teague said Chinese propane and ethane users are

dependent on imports. "So from an NGL perspective, I'm not

worried," he told analysts on Feb. 4, referring to natural gas

liquids.

Gearing up for the surge, Enterprise plans to open a

terminal in Orange County, Texas, in the second half of this

year to export 120,000 bpd of ethane and aims to expand that in

2026.

Energy Transfer ( ET ) said it would add 250,000 bpd of natural

gas liquids export capacity at Nederland, Texas, from the third

quarter of 2025.

Its co-chief executive officer, Marshall McCrea, told an

earnings call in November: "The international demand for ethane

and LPG continues to grow through the roof ... especially in

China."

($1 = 7.2751 Chinese yuan renminbi)