According to Nicholas Lua of Bloomberg, China’s plastics factories, which rely heavily on ethane imported from the U.S., are facing potential shutdowns due to the ongoing trade war and tariffs. Ethane is a key feedstock for petrochemical plants, but with U.S. tariffs reaching 125%, factories are losing money on every ton of ethane processed. These plants, which make up less than 10% of China’s ethane crackers, cannot easily substitute U.S. supply, as domestic production is insufficient and alternative sources are limited. The trade tensions are exacerbating the industry’s struggles, as the glut in plastic production already exceeds demand. Without tariff exemptions or alternative supplies, many factories may be forced to close. Lua writes:
Chinese plastics factories that depend on a gas they mainly import from the US are contending with the prospect of shutdowns as the world’s two largest economies bunker down for a prolonged trade war.
The world’s dominant plastics manufacturer gets almost all its ethane, a petrochemical feedstock that is also a component of natural gas, from the US, according to analysts. Eye-watering tariffs on American goods mean plants that cannot process substitute raw materials will bleed money.
“The situation is dire for China’s ethane crackers as they have no alternative to US supply,” said Manish Sejwal, an analyst at Rystad Energy AS, using an industry term for such facilities. “Unless they are granted tariff exemptions, they may have to stop production or close shop.” […]
Furthermore, the ethane market “is marked by long-term contracts, with little to no opportunity to resell cargoes on the spot market,” Rystad said April 10, making it tough for the Chinese to obtain alternative supplies from non-US sources.
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