HoustonChina replaced Gulf naphtha with US ethane.
Exports hit a record 776,000 barrels per day in March, 47% above 2025 levels, with three-quarters bound for China, trade data showed.
Tanker shortages and Panama Canal delays are straining logistics; traders expect elevated exports to persist through year-end.
Sources: TASS
WHY ETHANE, NOT OIL
Ethane is the second-lightest hydrocarbon — a gas at room temperature, separated from natural gas at processing plants. Crackers heat it to ~850°C to snap it into ethylene, the building block for polyethylene plastic. Ethane cracks more cleanly than naphtha (a liquid oil cut), yielding ~80% ethylene versus ~30%, with fewer byproducts to dispose of.
THE SHALE DIVIDEND
The US shale boom unlocked associated gas — methane and ethane that come up alongside oil. With domestic ethane supply exceeding what US crackers could absorb, the surplus had to be exported. Purpose-built Very Large Ethane Carriers (VLECs) — refrigerated to -89°C — emerged after 2016 to move it across oceans.
WHY CHINA NEEDS IT
China built a wave of ethane-only crackers on its east coast starting around 2020 — Satellite Chemical, Sanjiang — betting that imported US ethane would undercut domestic naphtha from refining oil. The bet paid off when US gas stayed cheap and Brent crude stayed expensive. China has no significant domestic ethane resource of its own.
THE HORMUZ CONNECTION
Gulf naphtha — refined from oil that transits the Strait of Hormuz — was the alternative feedstock China was buying. When Iran-war risk pushed Hormuz insurance premiums up and tanker availability down, the cost gap widened further in favor of US ethane shipped from Houston via Panama or the Cape.
THE STRATEGIC TRAP
China now depends on US-flagged ethane for a growing share of its plastics industry. In a US-China confrontation, Washington could restrict ethane exports the same way it restricts advanced chips — and China cannot quickly retrofit its ethane-only crackers back to naphtha. The 2018 trade war already saw brief Chinese tariffs on US ethane; Beijing dropped them within months because no substitute existed.
THE PANAMA BOTTLENECK
VLECs are too large for the old Panama Canal locks and rely on the 2016 expansion. Drought-driven Canal slot restrictions — recurring since 2023 — force ethane carriers onto longer routes via the Cape of Good Hope or Suez, adding two to three weeks per voyage and tying up fleet capacity that was already tight.