US-CHINA TRADE WAR WILL DESTROY PART OF CHINA'S CHEMICAL AND GAS INDUSTRY

China may shut down some plastics production due to ethane shortages, as nearly all of China's ethylene is supplied by the United States.

Chinese plastics plants that use American ethane are at risk of shutting down, Bloomberg reports.

The world's largest plastics producer sources nearly all of its ethane from the United States, analysts say. Tariffs on American products will mean factories that are unable to process other raw materials will suffer economic losses. "The situation for Chinese ethane refiners is dire because they have no alternatives to U.S. supplies. If they don't get tariff incentives, they may have to stop production or even shut down," Manish Sejwal, an analyst at Rystad Energy AS, told Bloomberg.

JLC International believes that China's domestic ethane production will not be able to fill the gap: in 2024, the country will produce about 120,000 tonnes of the gas.

Most Chinese petrochemical plants use naphtha as a feedstock. But there are also those that use only ethane as a feedstock, although they account for less than 10% of the total volume (about 4 million tonnes), according to Rystad.

According to data from the U.S. Department of Energy, China is the largest buyer of American ethane.

The ethane market is characterized by long-term contracts and the possibilities of reselling cargoes on the spot market are limited, Rystad said. This makes it difficult for China to obtain alternative supplies from non-U.S. sources.

According to Rystad, if a 125 percent tariff were imposed, refiners would lose $184 on every ton of U.S. ethane. That compares to more than $100 in profits they would have made without the tariffs.