Trade War to Slash China’s Demand for Plastic Feedstock From US

(Bloomberg) -- China’s demand for some of the building blocks used to produce plastics is set to drop as costs rise because of the trade war between Beijing and Washington. 

Import tariffs will raise the price of natural gas liquids (NGLs), a by-product of gas production, in another blow to China’s sprawling petrochemical sector, which is already dealing with a glut because of weak domestic demand. It will also complicate Beijing’s call for refiners to pivot to petrochemical production to offset lower consumption of road fuels. 

Demand for NGLs, including liquefied petroleum gas, naphtha and ethane, may fall by as many as 400,000 barrels a day immediately, according to industry consultancy FGE, which estimates China’s baseline consumption at 6.2 to 6.3 million barrels a day this year. High reliance on the US and hefty tariffs mean the sector is now facing one of its “largest hurdles,” said Mia Geng, an FGE analyst.

As it is, China’s 84% tariff on US goods including LPG has prompted volatility, with prices for alternative supplies from the Middle East surging. The US was the source of about 60% of China’s LPG imports in 2024, according to customs data. 

“Although we expect some imported LPG volumes to be substituted with Middle Eastern propane, it is unlikely that these can fully cover China’s hulking import demand,” Energy Aspects analyst Koen Wessels wrote in an April 10 note. 

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