US LPG, Ethane Exporters Brace for Tariff Turmoil
April 15, 2025
By Frans Koster
The intensifying trade conflict between the U.S. and China is disrupting the U.S. liquefied petroleum gas (LPG) and ethane sectors, with far-reaching implications for global energy dynamics. The U.S. has slapped a 145% tariff on most Chinese imports, prompting China to counter with a 125% duty on U.S. products. China, a major market for U.S. energy exports, accounts for roughly 20% of U.S. LPG shipments and nearly half of its ethane exports, making it a pivotal player in the crisis. “Finding new markets for these volumes will be a significant challenge,” a midstream industry source told Energy Intelligence.
The ethane market is feeling acute pressure, especially in the production of polyethylene, a vital plastic component. Kristen Holmquist, managing director analyst at RBN Energy, explains, “Chinese petrochemical facilities that rely on ethane as a feedstock depend entirely on U.S. supplies.” She warns that the new tariffs could render U.S. ethane too costly, leaving Chinese plants with two stark options: absorb the financial hit or cease operations. If closures occur, the U.S. would struggle to export its ethane surplus, likely redirecting it into the natural gas supply chain. Already, U.S. polyethylene prices have fallen 7.5% in a single week, bucking typical seasonal patterns, with Piper Sandler analysts pointing to a softening market.
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Propane markets are equally strained. China, the dominant buyer of U.S. propane, now purchases over five times the volume it did in 2018. “The sheer scale of U.S. propane exports makes rerouting global trade an inadequate solution,” says RBN’s Holmquist. While some exports might shift to countries like India, the impact would be minimal since China effectively dictates global propane prices. With the heating season concluded and crop-drying demand still months away, unsold propane could lead to ballooning inventories and plummeting prices. The U.S. Energy Information Administration (EIA) supports this outlook, predicting an 18% price decline this year and a dramatic 40.7% drop next year to 50¢ per gallon at Mont Belvieu, Texas, even as production continues to climb.
These tariffs are poised to send shockwaves through energy markets, impacting everything from polyethylene to broader oil demand, while recession concerns loom large, threatening further economic strain.
