- China’s Dependence on US LPG and Ethane Faces Major Disruption.
- Tariffs and Rising Import Costs Set to Affect China’s Petrochemical Sector.
- Middle East and Canada to Increase LPG Supply to China, But Shortfall Looms.
The new US-China tariff war has already started to impact the shipping market of LPG. The US has imposed a record 145% tariff on Chinese imports, inducing a retaliatory 125% tariff from China on all American imports, including LPG and ethane. That caused a 20% fall in VLGC rates on the US-Japan route within a week, with more weakening to come if the tariffs continue, reports Drewry.
China’s Heavy Reliance on US LPG and Ethane
China used more than 50% of its LPG and almost 100% of its ethane from the US in 2024. Growth in China’s PDH (Propane Dehydrogenation) capacity was also directly associated with the growth in low-cost US imports of propane. Ethane trade also witnessed a boom thanks to the increased production in the US and good margins, supporting various ethane cracker projects in China.
Mutual Losses: US Exporters and China’s Petchem Sector
The tariff war jeopardizes both economies. China faces significant disruption to its petrochemical industry, while the US may lose an important energy export market partner. China was responsible for 30% of US LPG exports and 55% of ethane exports in 2024. Replacing US volumes will be expensive for China, with Middle Eastern alternatives being offered at high premiums above Saudi CP prices. This will be painful for Chinese PDH plants that are already grappling with thin margins and experiencing declining downstream demand as a result of US tariffs on Chinese finished products.
Extra Costs May Mount
The Trump administration’s suggested Chinese-linked ship fees — between $1 million and $3 million per US port call — would further increase the cost of importing, even if passed on by charterers. This additional cost would hasten shutdowns of current plants and deter new project development, slowing LPG demand further.
Middle East and Canadian Imports to Rise
China may raise 2025 imports from the Middle East and Canada by 6.5 million tonnes, yet this will not completely offset US volumes. Help may come in the form of OPEC+ production increases and softer Indian demand as a result of subsidy reduction. Nevertheless, substitution will come up short and create a shortfall.
Russia and Iran: Priced-out or Risky Alternatives
Russia supplied only 0.3 million tonnes of LPG to China in 2024 through rail and road. A planned seaborne export terminal at Port Sovetskaya Gavan might alter this, but that’s pushed back to late 2025. Iran can provide some supply but heightened US sanctions might jeopardize this path.
Short-Term Boost, Long-Term Concerns
Before China’s 13 May deadline for taking US cargoes, customers scrambled to load US LPG, dropping US propane inventories and spiking Mt Belvieu prices. But once the window for loading closed, prices fell sharply once more, highlighting China’s significance to US LPG exports.
In the near term, shipping rates can be improved by vessel reallocation, and increased VLGC fixture activity on the US–India route. Japanese, South Korean, and Indonesian buyers will take up part of the US volumes redirected away from the spot market.
Medium-Term Tonne-Mile Contraction
Even with this temporary spike, tonne-mile demand will decline as China’s petchem demand slackens. In the long run, ongoing tariffs may drive global recession sentiment, lowering LPG and ethane demand and suppressing shipping revenues 2025–2026.
Early Indicators from Vessel Movement
The effect on the ethane market, particularly on the fleet of 30 Very Large Ethane Carriers (VLECs), is yet to be fully realized. Everyone is watching Wanhua Chemical’s VLEC Gas Zhujiang, which is due to arrive in Houston by 19 April, to provide early indications of trade disruption.
A sharp deceleration in US-China ethane trade might leave certain VLECs idle — or drive them to the LPG market with excess supply, further aggravating shippers’ woes.
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Source: Drewry
