U.S. lifts restrictions on ethane exports to China amid trade truce, reversing halted shipments

The U.S. Department of Commerce has removed export license restrictions on U.S. ethane shipments to China, effectively restoring a crucial flow of petrochemical feedstock following a brief suspension in June 2025. This policy reversal, announced on July 2, enables midstream operators such as Enterprise Products Partners (NYSE: EPD) and Energy Transfer (NYSE: ET) to resume exports to Chinese petrochemical buyers, following weeks of stalled shipments and geopolitical friction. The move aligns with a broader U.S.–China trade truce and may reestablish ethane exports to pre-disruption volumes of around 240,000 barrels per day.

What triggered the suspension of U.S. ethane exports to China in May and June 2025 and how did it affect trade flows?

The restrictions originated in late May 2025 when the Bureau of Industry and Security introduced a licensing requirement for U.S. exporters shipping ethane to China, citing national security concerns. This decision abruptly halted discharges of ethane cargo in Chinese ports, leaving loaded vessels stranded in international waters. By early June, U.S. ethane exports to China had dropped to zero from a monthly average of 257,000 barrels per day in May, based on market tracking data. Export terminals operated by Enterprise Products Partners at Morgan’s Point and Energy Transfer at Nederland, Texas, experienced sharp slowdowns, with at least eight ethane-carrying vessels idling due to offloading restrictions.

The suspension severely disrupted trade dynamics. China, the largest consumer of U.S. ethane, relies on the feedstock to fuel its growing ethylene production capacity. The halt not only created bottlenecks in Gulf Coast storage infrastructure but also depressed ethane prices in the U.S., as producers had limited alternatives for rerouting cargo.

Why are ethane exports to China vital for U.S. midstream operators and petrochemical markets?

Ethane, extracted from shale gas through cryogenic processing, is a cornerstone input for ethylene crackers in China’s industrial heartland. Chinese demand for ethane is driven by its cost advantage over naphtha-based cracking, offering higher margins for downstream producers. In 2024, China accounted for nearly 50% of total U.S. ethane exports, making it the largest international buyer.

For Enterprise Products Partners and Energy Transfer, China-bound shipments underpin terminal utilization rates and contractual throughput volumes. Analysts estimate U.S. ethane production reached 2.8 million barrels per day in 2024, with Gulf Coast export capacity scaling in tandem. The temporary suspension created material downside risk for midstream earnings, particularly as global ethane spot prices softened during the disruption. According to East Daley Analytics, the export pause put nearly $166 million in combined EBITDA at risk—$101 million for Enterprise Products Partners and $65 million for Energy Transfer.

How did the trade truce between the United States and China lead to a reversal of the ethane export restrictions?

The policy reversal followed a broader trade détente between the United States and China, brokered through meetings in London and Geneva. As part of reciprocal concessions, China agreed to relax rare earth mineral export controls, particularly those affecting high-performance magnets used in EVs and military systems. In exchange, the U.S. Department of Commerce removed the ethane export licensing requirement for four key exporters: Enterprise Products Operating LLC, Energy Transfer, Satellite Chemical USA, and Vinmar International.

On July 2, the Department formally issued new guidance allowing the loading, shipping, and offloading of ethane at Chinese ports. This rescinded the interim “load-only” authorizations granted in June, which had permitted vessels to depart the U.S. but not discharge their cargo, creating logistical bottlenecks in the South China Sea. Following the updated directive, vessels stranded off Chinese ports resumed discharge, and trade flows normalized by the first week of July.

What has been the response from midstream operators and institutional investors to the policy reversal?

Institutional sentiment turned sharply positive following the announcement, particularly among infrastructure-focused funds and energy sector investors. The restoration of export rights provides immediate relief to Gulf Coast storage facilities and reestablishes liquidity in the ethane market. Analysts now expect July exports to China to rebound to seasonal norms of 240,000 barrels per day, based on vessel tracking data and ship reactivation rates.

Enterprise Products Partners and Energy Transfer are also expected to see improved throughput and pricing leverage. Domestic ethane prices had fallen by as much as 60% in June due to oversupply, and the resumption of Chinese demand is expected to firm up margins through Q3 2025. Energy strategists describe the shift as “fragile but strategic,” cautioning that policy risk remains elevated, but acknowledging the restoration of China-bound ethane flows as a key market stabilizer.

What does the recovery of ethane shipments mean for planned infrastructure expansions in the United States?

With export volumes now restored, U.S. midstream operators are expected to resume infrastructure expansions that had faced uncertainty during the licensing pause. Enterprise Products Partners is advancing its Neches River ethane terminal expansion, slated to add 120,000 barrels per day of new capacity by Q4 2025 and an additional 180,000 barrels per day in 2026. The project is backed by long-term export contracts with Asian buyers, including Chinese petrochemical firms.

Energy Transfer is likewise expected to restart optimization efforts at its Nederland terminal and Marcus Hook facility in Pennsylvania. Institutional forecasts suggest that continued access to Chinese buyers justifies further capital expenditures on ethane fractionation and dock capacity. The policy clarity also improves financing conditions for terminal developers and storage operators across the Gulf Coast, many of whom rely on long-term offtake agreements linked to Chinese demand.

What are the lingering risks that could affect the stability of U.S. ethane exports to China?

Despite the resumed flows, several uncertainties loom over the trade arrangement. The current truce is part of a temporary deal framework, with a policy review expected by August 10. If talks between Washington and Beijing falter—particularly on issues like AI chip restrictions or dual-use materials—there is a risk of renewed restrictions on ethane or other energy-linked exports.

Moreover, enforcement conditions attached to the new export authorization remain strict. Exporters are now subject to compliance reviews, and any violation—such as discharging cargo without explicit approval—could incur fines of up to twice the cargo’s market value. Industry observers note that the narrow compliance window could constrain flexibility, particularly for cargoes re-routed mid-voyage due to weather or demand fluctuations.

How do analysts view the medium-term outlook for U.S. ethane and natural gas liquids exports to Asia?

If the current policy holds, analysts expect U.S. ethane exports to China to stabilize at 250,000–260,000 barrels per day through the remainder of 2025. Seasonal tailwinds, coupled with China’s ethylene cracker expansion plans, support further growth. U.S. ethane production is projected to exceed 2.9 million barrels per day by early 2026, creating ample surplus for export.

The United States remains the world’s dominant ethane exporter, and China its most critical growth market. Future structural growth will likely hinge on infrastructure alignment, tariff stability, and technological upgrades in both shipping and cracker conversion. Institutional investors are watching closely for signals of a more durable licensing regime or a potential move to formalize energy exports within a broader free trade framework.