INSIGHT: US suppliers maintain propane exports despite tariffs

HOUSTON (ICIS)–China’s tariffs on US shipments of liquefied petroleum gas (LPG) have yet to disrupt exports, and the companies that supply the material expect that will remain the case – even if prices fall.

• China has imposed additional 125% tariffs on US shipments of LPG, which it uses as feedstock for its on-purpose propylene plants.
• LPG is a by-product of oil and gas production, and the US will make the material regardless of the price of the material.
• The US market has limited capacity to absorb its LPG output, so prices for the material will fall until they are low enough to clear the international market.

CHINA’S PDH UNITS RELY ON LPG FOR FEEDSTOCK
Propane dehydrogenation (PDH) has become the largest route to produce propylene in China, taking up around 32% of the total based on effective capacity, according to ICIS Supply and Demand Database.

Nearly all of the feedstock for these PDH units is imported with the exception of a few producers that obtain propane from their refineries.

China has imported 29.24 million tonnes of propane in 2024, with 17.32 million tonnes or 59% from the US, according to customs data.

US LPG EXPORTS UNCHANGED
Enterprise Products, the largest US exporter of LPG, said nominations at its docks for May indicate that its customers are not changing their order patterns from prior months.

“We have not seen a disruption on exports of ethane or LPG,” said Tug Hanley, Enterprise senior vice president, pipelines & terminals. He made his comments during an earnings conference call.

Enterprise does not have any contracts with Chinese entities, he said. Instead, its counterparties are international companies that are experienced with handling trade disruptions such as tariffs.

Jim Teague, co-CEO of Enterprise, said the market is already rerouting LPG between among the biggest suppliers in the US and the Middle East and the biggest importers in China and India.

US CANNOT CEASE LPG PRODUCTION
LPG is a by-product of oil and gas production, and, so far, crude prices support output.

The biggest contributor to new oil production in the US is the Permian basin, and production will remain in maintenance mode if WTI crude futures remain at $55-60/barrel, according to Enterprise.

WTI remains within that range.

Even if US oil production remains flat between now and 2027, production of natural gas and natural gas liquids (NGLs) like LPG and ethane will continue growing.

As oil wells age, they produce larger shares of gases. In Enterprise’s scenario for flat oil production, US NGL production will increase by 200,000 barrels/day.

US propane consumption is not keeping up with production. In 2025 it should rise to 810,000 barrels/day from 2024’s 750,000 barrels/day, according to the short term energy outlook from the Energy Information Administration (EIA). It will remain at 810,000 barrels/day in 2026.

The US does have capacity to store LPG, but it cannot do so indefinitely, said Hanley of Enterprise. “Price will solve that.”

If tariffs, weaker demand growth or a combination of the two pressure LPG prices lower, then it could increase petrochemical margins among crackers that import the feedstock from the US. Several do so in Europe.

In the US, propane’s attractiveness as a raw material for ethylene production would depend on prices for ethane, the nation’s predominate feedstock for crackers. Cracking propane produces larger shares of propylene, so its sales price would have to be considered.

US Gulf propane-based ethylene contract margins have occasionally exceeded those for ethane-based production, as shown in the following chart.

US COMPANIES PLAN MORE LPG EXPORTS
Enterprise and ONEOK have made no changes to their plans to expand LPG export capacity.

• Enterprise is building the Neches River Terminal in Orange County, that can export 360,000 barrels/day of propane when completed in the first half of 2026
• Enterprise is expanding the Enterprise Hydrocarbons Terminal (EHT) on the Houston Ship Channel that will increase LPG export capacity by 300,000 barrels/day by the end of 2026.
• ONEOK and MPLX are building an LPG terminal in Texas City, Texas under the Texas City Logistics joint venture. When completed in early 2028, it can export 400,000 barrels/day of LPG.
• Energy Transfer is expanding its Nederland NGL terminal that will increase export capacity by up to 250,000 barrels/day in mid 2025. It did not specify the NGLs.
• Targa is pursuing a two-phase LPG expansion project at it terminal in Galena Park, Texas, that will increase total LPG export capacity to 19 million barrels/month when completed in Q3 2027.

Insight by Al Greenwood

Additional reporting by Seymour Chenxia

(Thumbnail shows a PDH unit, which converts propane into propylene. Image by Enterprise Products)