At the end of May, the US government sent letters to Enterprise Products and Energy Transfer, requiring them to obtain licenses before exporting, re-exporting or transferring ethane to China, On June 3, the Bureau of Industry and Security (BIS) of the US Department of Commerce issued a notice, saying that it planned to deny emergency authorization request by Enterprise Products for export of three ethane cargoes (a total of 2.2 million barrels) to China. This article analyzes the landscape of global ethane-ethylene value chain, especially that in China and the United States to figure out the impact of the United States' restrictions on ethane exports on China's ethylene industry.
【 Ethylene 】
Global production capacity for ethylene has exceeded 200 million tonnes per year, with China’s capacity ranking No.1
As a crucial basic raw material in the petrochemical industry, ethylene is known as the "mother of the petrochemical industry" and plays a central role in the industry. Accounting for more than 75% of petrochemical products, ethylene is widely used in the production of resins, fibers, rubber and plastics, etc. The chemical is made from light hydrocarbons such as naphtha, ethane, propane and butane, as well as coal-based methanol.
In 2024, global ethylene capacity reached 230 million tonnes per year, of which approximately 40% was located in Asia Pacific, around 25% in North America, roughly 18% in the Middle East and about 12% in Europe. As the world's largest producer of ethylene, China is expected to see its share of global capacity for ethylene rise to 25% by the end of 2025.
In the United States, ethane cracking process amounted to over 85% of national ethylene capacity due to lower ethane costs
In recent years, thanks to the successful exploitation of shale gas, the process of cracking light hydrocarbons for producing ethylene has gained traction in the United States. In particular, the 57 ethylene facilities in the country have mostly been transformed or designed to use ethane as the feedstock. Despite the heavy consumption, there is still excess supply of ethane. In 2024, the supply of ethane in America amounted to 2.7 million barrels per day, compared to the 2.22 million barrels per day needed to produce ethylene. That led to decreasing ethane prices, which were even lower than prices for other feedstocks such as propane and butane. As a result, the ethane cracking process represented up to 85% of national ethylene capacity.
China manufactured more than 48.5 million tonnes of ethylene in 2024, of which only 7.8% were made from ethane imported from the United States
By the end of 2024, China's ethylene capacity had reached approximately 57 million tonnes per year, representing a year-on-year growth of 5.3% and accounting for about 23% of the global capacity. Different production processes’ shares of China's ethylene capacity:
It can be seen that naphtha cracking process makes up a significant share, while ethane cracking represents only a small share. By the end of 2024, China had six ethylene cracking projects in operation, with an annual ethylene capacity of approximately 6.2 million tonnes (accounting for 11% of the national ethylene capacity) and output of 5.24 million tonnes. Two of the projects, fed by homemade ethane, manufactured 1.44 million tonnes of ethylene in the year. The other four projects, using imported ethane as the feedstock, produced approximately 3.8 million tonnes of ethylene.
In 2024, China's ethylene output amounted to more than 48.5 million tonnes, of which only 7.8% (approximately 3.8 million tonnes) was made from ethane imports from the United States (about 4.7 million tonnes). Thus it can be concluded that China’s ethylene industry is less dependent on ethane than U.S.
【 Ethane 】
Landscape of global ethane industry
1. Main sources and uses of ethane
The main sources of ethane include shale gas, oilfield gas, natural gas and refinery gas. Shale gas contains approximately 12% ethane and natural gas contains 5 to 10%. The ethane content in refinery gas varies significantly with the processing technology, the composition of crude oil and the operating conditions. In natural gas, ethane can certainly be found so long as methane, propane and butane are present.
Uses of ethane: Ethane is mostly used for producing ethylene through cracking process. Restricted by factors such as strict shipping and storage requirements, and inadequate wharf facilities, ethane is rarely separated and purified and further fully utilized around the world except the United States. More frequently, it is mixed with other components of natural gas for use as fuel. Due to small customer base, strict shipping and storage requirements and high prices, the chemical has not been marketed as a separate product.
Advantages of cracking ethane to produce ethylene
Cracking ethane to produce ethylene has significant advantages over cracking naphtha, propane and butane, including
(a) Lower costs: The prices of naphtha, propane and butane are highly correlated with those of crude oil. In contrast, prices for ethane are significantly correlated with those for natural gas and driven by supply and demand in the North American ethane market. Due to geopolitics and OPEC's production cuts, oil prices have been fluctuating at above USD 80 per barrel for a long time since 2022, driving up the prices of naphtha, propane and butane. High feedstock costs and sluggish demand have led to shrunk profit margins for manufacturers using these chemicals as raw materials. By contrast, since the outbreak of the shale gas revolution in North America, the production of natural gas including ethane has increased rapidly, resulting in a significant drop in the ethane prices in the US Gulf. In 2024, the spot prices for ethane in the US Gulf stood at around USD 140 per tonne. Accordingly, the costs for ethane cracking process were 30-40% lower than those for naphtha cracking.
(b) Lower investments: Requiring 20-30% lower investments than naphtha cracking facilities, ethane cracking units feature simple production process and low operating costs.
(c) High ethylene yield: The yield of ethylene from ethane cracking process, which produces few by-products, can reach over 80%, much higher than the about 30% from naphtha cracking and around 43% from propane cracking.
(d) Low carbon emissions: The carbon emissions per unit of production for ethane cracking are about 20% lower than those for naphtha cracking, making the former process more aligned with the trend toward decarbonization.
Global ethane supply and exports
Presently, North America and the Middle East are the two major regions where ethane resources abound, which combined account for approximately 85% of global supply. In the Middle East, ethane resources are mainly found in natural gas fields in Saudi Arabia, Qatar and the United Arab Emirates, most of which are used in local production of ethylene. And there are no export facilities in the region. The United States is the world's largest producer of ethane, accounting for roughly 50% of the global production. It is also the only exporter of ethane, targeting destinations such as China, India, Canada and Europe. Some other countries are also considering the possibility of exporting separated ethane.
Supply of and demand for ethane and ethane rejection in the United States
Growing at a CAGR of around 7.5% for the past five years, the U.S. ethane output reached 59.2 million tonnes in 2024.
In contrast, the domestic demand for ethane stood at around 48.3 million tonnes. The remaining 10.2 million tonnes were exported, including 1.6 million tonnes that went to Canada through pipelines and 8.6 million tonnes to other countries through marine transportation. These countries include China, European countries and India. Among them, China was the top destination for U.S. ethane exports through marine transport and represented 55% of such exports.
The massive investments in oil and gas facilities have led to a glut of supply in the United States, forcing it to reject the excess ethane, namely, blending it with other components of natural gas for use as fuel or for power generation. In 2024, about 17.5 million tonnes of ethane were rejected in the country.
Impact of the U.S. government' restrictions on ethane exports on firms with ethane export facilities
To alleviate the problem of oversupply, U.S. firms have built a number of ethane export facilities. Currently, Enterprise Products and Energy Transfer are the two companies in the United States that are able to export ethane. Enterprise Products’ facilities in Morgan's Point, Houston, Texas, are capable of exporting 5 million tonnes of ethane a year, most of which went to China, Europe and India. Energy Transfer’s facilities in Marcus Hook, Pennsylvania are able to export about 1.5 million tonnes a year, most of which went to Europe. Its facilities in Nederland, Texas are capable of exporting 3.75 million tonnes per year, which mostly went to China. The two exporters are still expanding their export capacities. Energy Transfer's expansion 3,750kt/a capacity in Houston will be put into operation in July 2025. Enterprise Products is building a 6,200kt/a export facility in Beaumont, Texas, with Phase I project expected to be brought into service in the second half of the year. Once the facilities come online, their ethane exports will mainly go to China as the latter is the only country that can consume exports from these additional capacities. However, if the government imposes restrictions on ethane exports, the exporters would suffer huge losses. There are two reasons. First, the restrictions will negatively impact their returns on investments, operating profits and further motives for reinvestment and market competitiveness. Also, they face the risk of default. Second, their plans for expanding ethane export capacities, which require investments of billions of dollars, will be questioned by the market.
Shift in the landscape of global ethane supply
As the economic benefits of ethane as an industrial raw material are widely recognized, the landscape of global ethane supply is shifting, with ethane projects launched in more and more countries and regions. These projects will eventually transform global ethane trade, although it will continue to be dominated by the United States in the short term.
Impact of U.S. ban on ethane exports on China's ethylene industry
Overall, the impact of U.S. government’s restrictions on ethane exports on China's ethylene industry will be limited. The reasons are as follows:
China has an excess ethylene capacity and its dependence on ethane imports from the United States is decreasing
China already has had excess production capacity for ethylene. In addition, importing ethane from Northeast Asia has become the norm. As mentioned above, the existing ethane cracking units in China consumed around 4.7 million tonnes of ethane imports from the United States to produce about 3.8 million tonnes of ethylene (representing only 7.8% of the national ethylene output). Thus, if the United States restricts its ethane exports, in the short term, ethylene manufacturers in China that entirely rely on U.S. ethane exports may face the risk of disruptions to supply. But the impact on the entire ethylene industry in China will be very limited.
Ethylene plants in China can switch from ethane to other raw materials
Most of the ethane cracking units in China allow for the possibility of switching to other feedstocks, including propane, butane and light naphtha. The flexibility ensures stable operation of ethylene facilities at a time when there are uncertainties over ethane supply.
[ Summary ]
The US restrictions on ethane exports may have an impact on some ethane cracking plants in China in the short term. But their effects on the entire ethylene industry will be very limited due to the small share of ethane cracking units using exported ethane as the feedstock in the national ethylene production, most facilities’ flexibility in switching from ethane to other raw materials and emerging suppliers in other countries and regions.
The United States seemingly "chokes the throat" of China by imposing restrictions on ethane exports. However, considering exporters’ massive investments in expansion export facilities, the possible idling of their assets and high ethane inventories, the ban will only cause greater harm to U.S. ethane industry, especially the exporters in it.
In the future, players in China's ethane-to-ethylene industry should pay close attention to the dynamics of the global ethane market so as to further optimize their supply of raw materials and increase their resilience to external shocks. By doing so, they can help ensure sustainable, steady, sound and green growth of the industry.
