US Allows Ethane Shipments To China But Blocks Unloading Without Approval

The United States has eased some of its recent export restrictions by allowing ethane cargoes to be loaded and transported to China, but the gas cannot be offloaded there unless companies get special permission from the government.

On Wednesday, the U.S. Department of Commerce sent letters to two major U.S. ethane exporters, Enterprise Products Partners and Energy Transfer, authorising them to load ethane onto tankers and sail to foreign ports, including China.

However, the companies were told they are not allowed to complete delivery of the ethane to any entity located in China without additional government clearance.

According to a person familiar with the matter, the letter stated: “This letter authorises Enterprise Products to load vessels with ethane, transport and anchor in foreign ports, even if… to a party located in China. However, Enterprise Products may not complete such export… to a party that is located in China,” unless further authorisation is granted.

The new decision seems to ease those rules slightly, possibly to help U.S. exporters and reduce port congestion. A source said oil industry representatives had spent weeks urging U.S. officials to lift the ban, saying it was hurting American companies more than China.

Ethane, mostly produced as a byproduct of oil in West Texas, has been building up in storage since the shipping halt began. It is used in the production of plastics and other petrochemical products, and about half of all U.S. ethane exports are typically sent to China.

Although companies have been cleared to start moving the cargoes, industry sources say they’re still unlikely to risk delivering them directly to China. If a shipment is offloaded in China without the necessary approval, exporters could face steep penalties, possibly up to twice the cargo’s value.

The policy change was issued by the U.S. Bureau of Industry and Security (BIS), which operates under the Commerce Department.

The revised guidelines may indicate that the U.S. is beginning to ease restrictions on exports tied to China. In recent months, both nations have imposed various trade-related controls. The U.S. had previously limited the export of not just ethane, but also chip design software, jet engines, and nuclear plant components.

At the same time, China has started issuing export licenses for rare earth materials, an area where it holds a global advantage. Authorities there also announced plans to speed up the approval process. Since rare earths are essential for electronics, batteries, and defense technologies, they have become a key focus in U.S.-China trade negotiations.

Transporting ethane from Houston to China typically takes about 30 days, so the updated guidance offers exporters a way to begin shipping while they wait for possible clearance to unload once the vessels arrive.

References: Reuters, Bloomberg

Source: Maritime Shipping News