Loses Edge Amid Tariff Squeeze

China’s plastic industry, long a global leader due to its cost advantage, is buckling under a 125% tariff on U.S. ethane imports, a vital feedstock for ethylene, the core of plastics used in products from bags to medical devices. This tariff, part of the U.S.-China trade war, has spiked ethane costs from $150 to $337.5 per ton, flipping a $100-per-ton profit into a $184 loss. Compounding the crisis, a 145% U.S. tariff on Chinese plastic exports creates a double hit: higher input costs for manufacturers and restricted access to the U.S. market. This dual pressure threatens China’s competitive edge—its low-cost production—eroding its dominance in the global plastic market.

In 2024, China, the world’s top plastic producer, sourced 98% of its ethane from the U.S., which supplied 35% of its 1.9 million tons daily output. China’s domestic ethane production, a mere 120,000 tons annually, cannot meet demand. Propane, used for polypropylene, is similarly constrained, with 59.2% of China’s 17.3 million tons imported from the U.S. The tariff has driven propane costs from $300 to $675 per ton, cutting propane dehydrogenation (PDH) plant profit margins from 10% to 2-3%. Over 80% of China’s 30 PDH companies, with a 20-million-ton capacity, rely on U.S. propane, and many have stopped production.

Major firms like Satellite Petrochemical, importing 6-8 million tons of U.S. ethane yearly, face a 40% production cut and a profit plunge from 4 billion yuan to 1.8 billion yuan in 2025. Wanhua Chemical’s ethane cracking output is down 30-50%, with PDH plants operating at 70% capacity.

Smaller factories, like Shenzhen Dinguan, have closed, leaving unsold machinery. With ethylene prices stagnant due to oversupply, plastic product prices have risen 10-20%, squeezing downstream sectors like packaging and automotive.

China’s alternatives are scarce. Naphtha, yielding 30% ethylene versus ethane’s 80%, demands costly equipment upgrades and production halts. Norway’s 3,000-barrel daily ethane output and Middle Eastern supplies are insufficient or pricier. China’s 29 ethane transport vessels are tied to U.S. contracts, and domestic ethane recovery lags. Rerouting propane via third countries raises logistics costs, offering little relief.

This crisis imperils 10-20 million jobs, with unemployment set to rise 0.5-1% in 2025. Plastic exports to the U.S., valued at $23.7 billion in 2024, have nearly ceased. Goldman Sachs forecasts China’s GDP growth dropping from 4.9% to 0.8% by mid-2025 without intervention. As China grapples with these tariffs, its plastic industry—once a low-cost powerhouse—faces a bleak future, with no viable backup to restore its lost advantage.