Trade War: US-China Clash Over Petrochemicals and Rare Earths. Washington Needs Beijing, Too
U.S. petrochemical producers could find themselves on the front lines of global trade wars, BNEF reported, as China’s dependence on the U.S. for raw materials ( such as ethanol ) blunts the impact of its dominance over rare earth metal exports.
In 2024, China imported more than 565,000 barrels per day of petrochemical feedstock from the United States, worth more than $4.7 billion , according to the Energy Information Administration. That dwarfs the $170 million in rare earth elements imported by the United States last year, about 70 percent of which came from China , according to the U.S. Geological Survey.
These data demonstrate the mutual dependence that the United States and China have developed over the past decades as trade ties have strengthened. While China has a strong control over the refining of many key metals for industry , it imports niche chemicals from the United States that are difficult to source elsewhere.
US Petrochemical Exports to China Source BloombergNEF
China relies on naphtha to produce most of its basic chemicals, which are further processed into everyday items like electronics and clothing. However, some plants can switch to cheaper propane when it is economically viable, which they do regularly. Propane dehydrogenation plants, however, cannot process alternatives like naphtha. The United States accounted for more than half of all China's propane imports in 2024.
U.S. producers have looked to China to buy their growing volumes of raw materials, whose market value has nearly quadrupled since 2020. China accounts for nearly half of the new mixed-fuel ethylene and propylene capacity coming online globally over the next four years, according to data compiled by BloombergNEF.
A forced divorce
The honeymoon period may be over. Following the introduction of tariffs by President Donald Trump's administration in April, China responded with retaliatory measures on U.S. imports, including a 125 percent tariff on raw materials such as propane and ethane. The tariff has effectively made it uneconomical to import raw materials from the United States.
Alternative sources of propane may be difficult or expensive to find, as Middle Eastern producers send the majority of their supplies to India, South Korea and Japan. While some rerouting is possible, Middle Eastern players may take advantage of the lack of alternatives for Chinese propane dehydrogenation plants to charge a premium . Chinese propane dehydrogenation players, such as Hengli Petrochemical, have already suffered from tight margins in recent years. Many may decide to temporarily close their operations.
A complex solution
China moved quickly to remove tariffs on U.S. ethane as trade talks began. But while China appears willing to buy ethane from the U.S. , the U.S. administration may no longer allow it . Enterprise Products Partners, the largest U.S. exporter of petrochemical feedstocks, received a notice Wednesday from the U.S. Commerce Department’s Bureau of Industry and Security denying ethane export licenses to China on the grounds that such flows “pose an unacceptable risk of use or diversion to ‘military end-use’ in China.” Energy Transfer received a similar notice.
Plants using Ethane or Naphtha in China for petrochemical purposes
China’s ethane cracking capacity is far behind its capacity to process naphtha and propane, but nearly all of its ethane imports come from the United States. The restrictions will significantly impact plants in Lianyungang and Tianjin, owned by Satellite Chemical, Sinopec and INEOS. SP Chemicals, a Singapore-based producer, sources most of its feedstock from Enterprise Products Partners.
As the trade war continues, it looks like commodities could drive the fight, with players on both sides set to suffer the consequences.
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The article Trade War: USA-China, clash over petrochemicals and rare earths. Washington is also necessary for Beijing comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/guerra-commerciale-usa-cina-petrolchimici-terre-rare/ on Tue, 10 Jun 2025 10:00:37 +0000.