Will U.S. ethane export restrictions have limited impact on China‘s ethylene industry?

Ethylene is known as the "mother of the petrochemical industry" and is a key raw material for the sector. From late May to early June 2025, the U.S. government gradually announced a licensing approval system for ethane exports to China, involving two American exporters—Enterprise Products and Energy Transfer—and rejected Enterprise Products’ applications to export three shipments totaling 2.2 million barrels of ethane. This sudden change has drawn strong global attention from the chemical industry. If the U.S. imposes restrictions on ethane exports, how significant would the impact be on China's ethylene industry?

China is the world’s largest producer and consumer of ethylene

In 2024, global ethylene capacity reached approximately 230 million tons per year. Regionally, the Asia-Pacific region led with about 40%, followed by North America at around 25%, the Middle East at 18%, and Europe at 12%. As the world’s largest ethylene producer and consumer, China had an ethylene capacity of about 55 million tons in 2024, with annual output exceeding 48.5 million tons.

In terms of feedstock, global ethylene production shows significant diversification, primarily including naphtha, ethane, propane, butane, and other light hydrocarbons, as well as coal/methanol.

Statistically, in China, naphtha cracking is the dominant route for ethylene production, accounting for about 69% of capacity, coal/methanol-to-olefins routes account for about 16%, ethane cracking accounts for about 11%, and other light hydrocarbon cracking routes make up about 4%.

By the end of 2024, China had six operational ethane cracker projects, with a combined ethylene capacity of about 6.05 million tons/year and output of approximately 5.24 million tons/year. Among these, two projects used domestically sourced ethane, producing 1.44 million tons/year of ethylene, while four projects relied on imported ethane, producing about 3.8 million tons/year.

In 2024, China imported about 4.7 million tons of ethane from the United States, all used for ethylene production (approximately 3.8 million tons). Ethylene produced from imported ethane accounted for 7.8% of China’s total ethylene output, indicating that imported ethane has a limited impact on China’s ethylene industry.

The U.S. holds unique ethane export capabilities

Ethane is mainly derived from shale gas, associated petroleum gas, natural gas, and refinery gas. From a geological perspective, wherever there is natural gas containing methane, propane, and butane, ethane is also present as a byproduct. However, since ethane has limited uses beyond cracking into ethylene and is constrained by shipping, port infrastructure, and storage limitations, few countries besides the U.S. separate and purify ethane on a large scale. Buyers of ethane are scarce, and in most regions outside the U.S., ethane is not fully utilized but instead mixed with natural gas for fuel. Limited market demand, logistical constraints, and pricing factors have kept ethane markets underdeveloped, with prices closely tied to natural gas market trends.

Globally, ethane supply is currently concentrated in North America and the Middle East, which together account for about 85% of supply. In the Middle East, ethane comes mainly from conventional natural gas fields in Saudi Arabia, Qatar, and the UAE, and is primarily used to meet local ethylene production needs.

The U.S. is the world’s largest ethane resource holder and producer, accounting for about 50% of global ethane output, and is currently the only country with established ethane export capacity. In recent years, the U.S. shale gas revolution has led to a substantial increase in ethane supply, making ethane significantly cheaper than propane or butane. As a result, the share of ethane cracking in ethylene production has risen sharply, exceeding 85% in the U.S. While some other countries are considering ethane separation and export, the U.S. remains the sole major exporter today.

Ethane cracking offers significant economic advantages

Compared to traditional naphtha cracking or propane/butane cracking, ethane cracking offers multiple economic benefits.

Price advantage: Naphtha, propane, and butane prices are highly correlated with crude oil prices, whereas ethane prices are more influenced by natural gas markets, particularly driven by supply and demand dynamics in North America. Since 2022, international oil prices have remained high, hovering around $80/barrel, pushing up prices for naphtha, propane, and butane. High feedstock costs combined with weak downstream demand have sharply reduced cracking margins in China. In contrast, since the U.S. shale gas boom, domestic natural gas and associated ethane production have surged, causing Gulf Coast ethane prices to drop significantly. In 2024, spot ethane prices at the U.S. Gulf Coast were around $140/ton. Based on this, the cash cost of ethylene production from ethane is about 30–40% lower than from naphtha.

Higher investment efficiency: Ethane crackers require 20–30% less capital investment than naphtha crackers of equivalent scale, and their simpler process flow results in lower operating costs.

Higher ethylene yield: Ethane cracking achieves ethylene yields above 80%, far higher than naphtha or propane cracking, and produces fewer byproducts.

Lower carbon emissions: Per unit of output, ethane cracking emits about 20% less CO? than naphtha cracking, better aligning with low-carbon development goals.

Export restrictions would harm U.S. energy companies

While U.S. restrictions on ethane exports may appear to “strangle” others, they would actually inflict greater damage on the U.S. itself. U.S. suppliers have invested heavily in export infrastructure; if these assets sit idle and ethane inventories build up, the consequences would be severe—especially for U.S. exporters with large fixed investments.

The U.S. currently has 57 ethylene production units, most of which use ethane as feedstock. In 2024, domestic ethane production reached 59.2 million tons, growing at an average annual compound rate of about 7.5% over the past five years. Total ethane demand in the U.S. was approximately 48.3 million tons/year.

In 2024, U.S. ethane exports totaled around 10.2 million tons, including about 1.6 million tons exported via pipeline to Canada and about 8.6 million tons shipped by sea. Of the seaborne exports, 55% went to China—the largest destination—while the remainder was mainly sent to Europe and India.

The current U.S. ethane market is oversupplied. Due to sustained upstream oil and gas investment and limited local chemical absorption capacity, large volumes of surplus ethane are being re-injected or blended with natural gas for fuel or power generation. In 2024, U.S. ethane re-injection amounted to about 17.5 million tons.

To alleviate oversupply, the U.S. has expanded ethane export infrastructure. Currently, two companies—Enterprise Products and Energy Transfer—have ethane export capabilities. Enterprise Products operates at Morgan’s Point in Houston, Texas, with an annual export capacity of 5 million tons, primarily serving China, Europe, and India. Energy Transfer operates at Marcus Hook, Pennsylvania, with an export capacity of about 1.5 million tons/year, mainly to Europe, and at Nederland, Texas, with a capacity of 3.75 million tons/year, primarily serving China and India.

Additionally, U.S. exporters are advancing expansion plans. Energy Transfer plans to add 3.75 million tons/year of capacity in Houston, scheduled to come online in July 2025. Enterprise Products is building an ethane export facility in Beaumont, Texas, with a maximum capacity of 6.2 million tons/year, with Phase I expected to begin operations in the second half of 2025.

Currently, these new export capacities are primarily aimed at the Chinese market, which is the only one capable of absorbing such large volumes of additional supply.

In other words, both major U.S. ethane exporters have invested heavily in export infrastructure set to become operational by the end of 2025. If the U.S. government imposes export restrictions, these companies would face massive losses and potential breach-of-contract compensation liabilities.

From the perspective of U.S. corporate interests, export restrictions would directly affect major producers’ investments and profits, eliminating a crucial revenue stream, reducing return on investment, and undermining reinvestment capability and market competitiveness. From an industrial planning standpoint, multi-billion-dollar ethane export expansion plans would come under scrutiny. Export restrictions would undermine the market foundation for these projects, inflicting heavy losses on the U.S. energy sector. On a broader level, such restrictions could