The Trump administration has placed new restrictions on ethane and butane exports to China in a move likely to disrupt trade in NGL markets.
The Department of Commerce on May 23 notified Enterprise Products (EPD) that it has elevated ethane/butane exports to China to the level of a national security risk, EPD disclosed in an 8-K filing. The Bureau of Industry and Security (BIS) determined the commodities could be diverted to end-users in China’s military, and will require companies apply for a license for further exports to the country, EPD said. “At this time, [EPD] cannot determine whether the Partnership will be able to successfully obtain any required BIS license in a timely manner,” EPD warned.
The new restrictions raise the risk of lost sales for exporters. While tariffs can be absorbed through margin compression, supply chain rerouting or burden-sharing among counterparties, companies can’t ignore the BIS directive without severe legal consequences.
The market disruption could be immediate. China took in 46% of US ethane exports and 5% of butane exports in 2024, according to Energy Information Administration data (see figure). Ethane retains some optionality – some can be rejected and remain in the residue gas stream - but butane has no such release valve.
EPD and Energy Transfer (ET) are most directly exposed to the sudden policy shift, according to East Daley Analytics’ NGL Hub Model.
• EPD’s Morgan’s Point terminal exported ~40% of its ethane volumes to China in 2024 and could face an immediate drop in throughput.
• ET’s Orbit terminal is in the danger zone. Its anchor shipper is Satellite Chemical, a major Chinese petrochemical firm. Satellite also owns 41.9% of the Orbit pipeline connecting to the terminal. The dock’s commercial viability is now in question.
Increased tensions pose long-term risk for the growing NGL trade with China. 100% of China’s ethane imports come from the US. That means its current ethylene cracker fleet, and the next wave of builds, is entirely dependent on US molecules. If the restriction holds, China’s planned petrochemical expansions could become obsolete on arrival. Projects under construction may stall. Existing plants could face critical feedstock shortfalls. China bet billions on US ethane - and that bet just got rerated overnight. – Julian Renton Tickers: EPD, ET.
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