A trade fight over ethane fizzled before it could get started, said Enterprise Product Partners CEO Jim Teague during the company’s April 29 first-quarter earnings call.

Minutes before the morning earnings meeting, Reuters reported that China waived its 125% tariff on U.S. ethane, according to unnamed sources.

“I've never seen U.S. hydrocarbons get this much attention worldwide,” Teague said while discussing the fluid state of international markets. “But now it appears China is going to exclude ethane and ethylene from their tariffs to protect their petrochemical business.”

Enterprise and Energy Transfer are the country’s key exporters of ethane, a chemical with a wide range of uses vital to industrial production. Enterprise sends between 40% and 50% of its ethane exports to China.

The company reported that the ongoing trade dispute between the U.S. and China has had no effect on their ethane volumes shipped—or on upcoming orders, which was in line with analyst expectations.

“Major players did not observe any decline in ethane export demand leading up to the tariff waiver,” Julian Renton, energy analyst for East Daley Analytics, said in an email to Hart Energy. “In fact, Enterprise Products Partners reported a 68 Mbbl/d increase in ethane exports out of Morgan’s Point [export facility]. The market had largely priced in the expectation that the tariffs would be waived, with both U.S. and international petrochemical players continuing to operate as if access to U.S. ethane would remain uninterrupted.”

China balked at the tariff as the U.S. and is the world’s only major ethane exporter, and cutting off the supply would damage the country’s plastics and petrochemicals sector, Renton said.

The immediate effect of China’s move may be to take some of the current uncertainty out of the global trade environment and encourage long-term commitments for shipments and infrastructure on either side, he said.

Natural gas prices, which had been trending downward since mid-March, rallied over the past two days. After falling below $3/MMBtu on April 23, front-month futures prices at the Henry Hub closed at $3.37/MMBtu on April 29.

China has not, however, canceled a tariff on LPG, meaning some of the company’s export shipments will be rerouted.

Teague said international agencies that specialize in petrochemicals are responsible for the actual transport and overseas marketing and will be able to adjust to the situation. The price point for LPG is likely to drop, executives said, meaning the company will probably slow production.

“The market has already gone to work rerouting barrels between the world's biggest LPG suppliers, the U.S. and the Middle East, and the biggest importing countries, being China and India,” Teague said.

Growth, chaos persist

According to analysts, lower margins in several segments, including NGLs, caused Enterprise’s earnings to come in lower than market expectations. Adjusted EBITDA of $2.4 billion was about 4% lower than the average street estimate of $2.55 billion, according to an April 24 TPH Energy Research report by Analyst A.J. O'Donnell.

O’Donnell rated Enterprise as a strong buy, considering the company’s strong growth profile, especially in natural gas and NGLs. The company has set its 2025 capex range between $4 billion and $4.5 billion in 2025; and $2 billion to $2.5 billion in 2026.

Comments