US propane exports have seen relatively steady growth in recent years, and East Daley Analytics forecasts growth to temper but continue trending higher. However, propane recently has fallen victim to the US-China trade conflict, and those tensions may affect the trajectory of exports over the long term.
The Trump administration in late May imposed restrictions on ethane exports to China, citing national security risks. The Department of Commerce lifted those restrictions in early July, but damage has already been done — China in June doubled its annual import quotas for naphtha, according to Reuters.
Naphtha is used as a petrochemical feedstock in crackers in the same way as ethane, although the yields and byproducts are different. Most newbuild plants are geared towards ethane or propane, particularly in China where the petrochemicals industry has been on a building spree over the past few years. However, older units use naphtha as feedstock, while some others are mixed-feed, allowing operators to take whichever feedstock makes the highest profit.
See East Daley Analytics’ Propane Supply & Demand Report for more information. With China comprising nearly 20% of US propane exports, the incentives for more naphtha use put downward pressure on US propane. Whether the barrels make their way to other international markets, and command a lower price as a result, is something East Daley will continue to monitor. – Alex Albazzaz.
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