The Trump administration has eased recent export limits on a critical petroleum product that’s used to make plastics — a shift that represents a modest pullback on curbs used as leverage in trade negotiations with China.
Under the change, Enterprise Products Partners LP and Energy Transfer LP are being allowed to load that gas, known as ethane, onto tankers and transport it to Chinese ports. However, they are still barred from unloading that cargo for use by Chinese entities, said people familiar with the matter who asked not to be named.
Enterprise Products “may not complete” ethane exports to Chinese entities “without further BIS authorization,” the US Bureau of Industry and Security said in a letter Thursday to the firm. Energy Transfer was also notified of the change, the people said.
The shift follows weeks of lobbying by oil industry advocates who told administration officials the restrictions were inflicting more pain on the US than China. The use of ethane, which China depends almost entirely on America for, as a trade war bargaining chip has disrupted supply chains and redirected flows.
While US inventories of ethane — essentially a byproduct of shale production in West Texas — climbed, expensive ships purpose-built to carry the fuel have been forced to idle or sail to new destinations like India after previously only plying dedicated routes between the US and China.
As of late last week, INEOS Group Holdings SA had one tanker full of ethane waiting to ship and Enterprise Products Partners had three to four cargo ships stuck in limbo, according to a person familiar with the matter.
Representatives of Enterprise Products, Energy Transfer and the Commerce Department, which oversees BIS, did not immediately respond to requests for comment on the shift, first reported by Reuters.
While the revised licensing requirements will ease congestion at US Gulf Coast loading terminals by allowing previously stuck ethane ships to finally head to China, “the question still remains: what happens when they reach their destination?” said Samantha Hartke, head of market analysis for the Americas at Vortexa.
The Trump administration’s move could effectively buy time for the US to secure more certainty around the export of rare earth materials from China, a key element of the trade framework Washington reached with Beijing earlier this month. Vessels carrying ethane from Houston would generally take about 30 days to reach Chinese ports.
The administration had restricted exports of chip software, jet engines and ethane ahead of the two nations’ trade talks earlier this month, in a move seen as building leverage for concessions around China’s rare earth exports.
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