China slashed its imports of many U.S. energy and agricultural commodities in March amid intensifying trade and tariff tensions with the United States, which are set to further reduce Chinese purchases of American goods this month and in the coming months.
Last year, U.S. LNG represented about 5% of China’s imports of the super-chilled fuel.
Similarly to non-existent LNG, China did not import any wheat from the U.S. in March, per Chinese customs data cited by Bloomberg on Monday.
Chinese cotton imports from the United States plummeted by 90% in March from a year earlier, which purchases of U.S. corn slumped to a five-year low, according to the data.
Among agricultural products, soybean imports into China from the U.S. rose to buck the general trend, as Chinese buyers typically import soybeans from the United States early in the year until the South American harvest becomes available in the autumn, or in the springtime in the northern hemisphere.
Among energy products, imports of U.S. liquefied petroleum gas (LPG) declined by 36%, and purchases of metallurgical coal used in steelmaking plunged by 62% in March from a year earlier, per the Chinese customs data cited by Bloomberg.
Many U.S. cargoes may have also been contracted before the tariff war erupted and right after the uncertainties about Russian supply in January, following the U.S. sanctions on Russian trade. These sanctions, one of the Biden Administration’s last sanctions moves, roiled the oil market flows for several weeks until the supply chain of non-sanctioned tankers reshuffled to service mostly China.
That energy commodities will be the first to suffer from the trade spat between the United States and China was only to be expected. As tension—and tariff rates—rise, energy commodity trade has plummeted. And it has spread to one major U.S. export segment: petrochemical feedstock.
Last year, propane exports from the United States hit a record high since records began back in 1973. These exports had been rising for 17 years straight, the Energy Information Administration reported last month, as natural gas production boomed—and as demand for petrochemicals from Asia increased, especially from China.
Indeed, per the EIA, U.S. propane exports last year rose 13% on the previous year thanks to higher demand in Asia. More specifically, however, “Chinese consumption accounts for most of the growth in U.S. exports to Asia; U.S. propane exports to China grew by 40% in 2024.”
Now, the tariff war has reached propane trade, with China including the propylene feedstock in its list of goods subject to retaliatory tariffs, alongside liquefied natural gas and crude oil. The Wall Street Journal reported last week that propane prices in the United States had shed 15% since the tariff tit-for-tat began, and that prices for the tankers that carry the commodity to export markets had taken a dive as well.
As already noted, it is not the only commodity that has been affected by the tariffs. Indeed, China has stopped buying U.S. liquefied natural gas—which has proven a boon for Europe—and it was also set to stop buying U.S. crude oil. Yet, when it comes to propane, there is a twist.
“China cannot replace U.S. propane and the U.S. cannot replace the Chinese propane demand,” Julian Renton, an analyst with energy research company East Daley Analytics, told the WSJ. “These two markets are linked and they won’t be able to unlink.” The twist is that since the last time the United States and China got into a tariff war, China had a lot less petrochemical capacity and, consequently, demand for propane. That was in 2018, during Trump’s first term. Now, this capacity has grown considerably as demand for petrochemicals increases. Many analysts, in fact, predict that the petrochemicals sector will replace transport as the biggest driver of crude oil demand in an electrified future.
China is at the forefront of this change. A top petrochemical producer, its energy majors are preparing for an environment where petrol and diesel will not be the main products that the market needs. Indeed, last month, the National Development and Reform Commission, the country’s central planner, advised refiners to boost petrochemical production at the expense of fuels.
“We will advance petrochemical industries toward fine chemical industries by cutting the output of refined petroleum products, increasing the output of chemical products, and enhancing quality,” the NDRC said in its annual report.
China’s demand for fuels has been undermined by the surge in EV sales in recent years and the introduction of LNG-powered trucks, which may have led to a peak in diesel demand, according to Sinopec. The state energy major said that diesel demand may have peaked back in 2019, and gasoline demand could have reached its highest ever in 2023. Yet China’s demand for petrochemical feedstock is rising—and this is not only a problem for China
China is the second-largest importer of U.S. propane—and it is the largest importer of U.S. ethane, another petrochemical commodity. Per data from the EIA cited by Fortune, China takes in almost half of U.S. global ethane exports. In propane, it accounts for about 360,000 bpd in imports, while the rest of the world takes in 1.5 million bpd.
“The two industries need each other,” Kristen Holmquist, RBN Energy managing director for analytics, told Fortune. “The U.S. needs to be able to send its propane to China. For a large portion of it, the propane has nowhere else to go except China.” China, meanwhile, may have an alternative supplier just north of the United States.
The Energy Information Administration reported earlier this month that Canada’s propane exports, just like the United States’, have been on a steady rise over the past few years—especially to Asia. In fact, the EIA said, last year, Canadian exports of propane to Asia made up over 40% of total global exports of the commodity. These exports mostly go to Japan and South Korea, but with the tariff war still raging on, this may change.
Meanwhile, Americans heating their homes with propane are in for some good news. There are not enough alternative export markets for all the propane that the U.S. used to sell to China. This means that the supply situation at home is about to swing into a surplus—if it hasn’t already—and that surplus will drive prices further down. There’s always a silver lining, after all.
By Irina Slav for Oilprice.com
