What they're not telling you: One year ago, in the immediate aftermath of Trump's Liberation Day tariffs, there was a flurry of discussion over who is more reliant on whom: the US on Chinese rare earth materials, or China on US ethane output ( see " Chinese Plastics Factories Face Mass Closure As US Ethane Supply Evaporates " and " Who Blinks First? China May Exempt Tariffs On US Ethane & Other Goods " ). Following the detente in the US-China trade war, that discussion was quietly relegated to the back of the line, however the time has come to bring it up again.
# THE TAKE **The Real Winners Aren't Who You Think** This isn't a victory lap for American energy dominance—it's a geopolitical mugging dressed as market efficiency. Yes, China's pivoting to US ethane because Iran sanctions are tightening supply chains. But let's be precise: Washington didn't "win" this. It created the conditions for a transactional arrangement that locks Beijing into petrochemical dependency on American infrastructure for the next decade. The grim math? China's industrial base becomes hostage to US foreign policy whims. One escalation in the Gulf, one new sanctions regime, and Beijing's plastics, fertilizers, and downstream manufacturing seize up. It's weaponized commerce—and it works precisely *because* it looks like normal trade. The irony Washington won't admit: this "record import-economics.html" title="Venezuela and Iran Unrest: Implications for China’s Oil Import Economics" style="color:#1a1a1a;text-decoration:underline;text-decoration-style:dotted;font-weight:500;">import" is actually proof the unipolar moment is corroding. China doesn't have better alternatives; it has *no* alternatives. That's not American strength. That's system brittleness masquerading as leverage.
What the Documents Show
That's because with the Iran war choking off traditional - and crucial - supplies, China is set to import a record volume of US ethane this month as petrochemical producers desperately seek alternative feedstocks for their operations. Shipments of US ethane are expected to rise to an all-time high of 800,000 tons in April, according to Chinese consultant JLC, which would be around 60% higher than the monthly average. Some companies can switch to using ethane, helping them offset disruptions to the supply of naphtha and liquefied petroleum gas from the Middle East after the effective closure of the Strait of Hormuz. Ethane is a natural gas liquid primarily used to produce ethylene, a key building block for plastics, and China depends almost entirely on the US for supply. The product became a political flashpoint between Beijing and Washington last year after the US tightened export controls during a bitter trade war.
Follow the Money
Of course, this means that if Xi plays the rare earth cards in his upcoming summit with Trump, the US president can retaliate by simply shutting down China's plastics industry. US ethane has become the preferred alternative for China’s ethylene makers due to stable supply and lower cost, said Shi Linlin, an analyst with JLC. Profits to produce ethylene from ethane was tenfold that of naphtha as of April 15, which has been inflated by crude-linked pricing, JLC said. A ramp-up of downstream production capacity has also lead to a pickup in demand for the gas. A new ethane unit developed by Wanhua Chemical Group and a multi-feed cracker unit by Sinopec Ineos (Tianjin) Petrochemical Co., have both supported higher imports this year, Shi added. The International Energy Agency said last week that “petrochemical feedstocks display the most immediate effects of the war by far,” and that supply chains to Asia have been thrown into “disarray.” Japan has been forced to scramble for naphtha, tapping a range of suppliers including from the US and Africa.
What Else We Know
In February, just before the war started, more than 50% of China’s naphtha imports and over 40% of its LPG purchases originated from Persian Gulf nations, according to Chinese government data. That supply chain has now been cut off for as long as the Strait of Hormuz is blocked. And while China may have a massive 1.5 billion oil barrels in strategic petroleum storage, it has no naphta or ethane, meaning its plastic industry is suddenly very much exposed. “The disruption around the Strait of Hormuz has really highlighted how exposed Asia is to Middle Eastern naphtha,” said Amber Liu, the head of Asia Petchem Analytics at ICIS. This year, naphtha-fed crackers have accounted for about 57% of China’s ethylene capacity, compared with 16% for ethane, she said. China’s ethane buying spree comes ahead of President Donald Trump’s planned visit to Beijing in mid‑May, and US energy is expected to be part of the agenda.
Primary Sources
- Source: ZeroHedge
- Category: Global Power
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