- Tariff tensions: U.S.-China tariffs averaging over 120% have disrupted petrochemical trade and raised input costs.
- China diversifies supply: Imports from Iran, Russia, and Venezuela now comprise 27% of China’s crude oil supply, up from 15% in 2019.
- Middle East gains ground: Gulf nations boost refining and petrochemical exports to China, with Saudi Aramco investing in key Chinese projects.
Rising tariffs between the United States and China have disrupted petrochemical trade and triggered a global supply chain shift.
Since 2018, both countries have sharply raised tariffs. The U.S. now applies an average duty of 124.1% on Chinese goods. China imposes average tariffs of 147.6% on U.S. products. These tariffs now affect nearly all goods traded between the two countries.
Petrochemical raw materials like ethane and propane top the list of impacted products. These chemicals fuel China’s expanding petrochemical industry. The high costs and limited availability of U.S. supplies have strained Chinese manufacturers.
China has responded by sourcing more oil and petrochemicals from other countries. It now imports more crude oil from Iran, Venezuela, and Russia. These sanctioned countries increased their share of China’s oil imports from 15% in 2019 to 27% in 2024.
Iran grew its daily exports to China from 340,000 barrels in 2019 to 1.2 million in 2024. Russia followed closely, increasing shipments to 1.3 million barrels per day. At the same time, West African countries lost ground, watching their share fall from 17% to 9%.
China has also scaled up its petrochemical production. Demand for ethane, propane, and naphtha has soared. Between 2019 and 2024, China’s daily demand for these feedstocks rose by 2.1 million barrels.
Domestic production capacity continues to climb. From 2024 to 2028, China plans to boost its annual ethylene output by 25 million tonnes, accounting for nearly half of all new global capacity.
Propylene production has also surged. China has built more Propane Dehydrogenation (PDH) plants to convert propane into propylene. These facilities now produce about 22 million tonnes annually, contributing 32% of the country’s propylene supply.
However, China’s PDH plants still depend on imported U.S. LPG. The tariff hikes now threaten this supply line, so Chinese producers are shifting attention to naphtha-based processes.
Middle Eastern countries have seized the opportunity to strengthen ties with China. Saudi Arabia, Kuwait, and the United Arab Emirates supply 35% of China’s crude oil. They have maintained this share despite global oil market volatility.
These countries also expanded their refining capacity. Between 2014 and 2024, they increased daily capacity from 4.9 million barrels to 7.2 million. They also scaled up naphtha and LPG output to meet rising Chinese demand.
In addition, Gulf nations have deepened their investments in China’s chemical sector. Saudi Aramco secured stakes in major Chinese petrochemical projects, including Yulong, Zhenhai, and the Sabic-Fujian complexes. These deals ensure long-term access to the Chinese market and boost Saudi Arabia’s chemical exports.
The U.S.-China trade war has forced China to rethink its energy partnerships. While the U.S. loses market share, Gulf countries have positioned themselves as key players in the global petrochemical landscape.