Summary:
China's petrochemical industry faces tariff-driven cost hikes and supply chain shifts in 2025, with rising import costs from the U.S. prompting shifts to Russian/Middle Eastern sources. Price volatility and domestic capacity expansion (e.g., Inner Mongolia projects) emerge, alongside short-term export risks and long-term opportunities in green tech and import substitution.
I. Tariff Policy Dynamics and Their Impact on China's Petrochemical Sector
Since 2025, the U.S.-China tariff game has continued to escalate, creating two-way shocks to the petrochemical industry chain:
China's Countermeasures Against U.S.:
Since February 10, 2025, 10%, 15%, and 15% tariffs have been imposed on crude oil, coal, and liquefied natural gas (LNG) originating from the U.S., respectively.
On April 10, 2025, China further raised the tariff rate on imported U.S. goods from 84% to 125%, covering core categories such as chemical raw materials, plastics, and their products.
U.S. Tariff Hikes on China:
The U.S. government increased the "reciprocal tariff" rate on Chinese goods to 125%, with the comprehensive tax rate for plastics and their products (HS39) reaching 104%, directly impacting the export competitiveness of Chinese plastic products.
The U.S. imposed a 50% tariff on light hydrocarbon resources such as propane and ethane, causing a surge in raw material costs for China's PDH (propane dehydrogenation) plants.
Core Impacts:
Cost Conduction: The import cost of U.S. crude oil increased by approximately $7 per barrel, and propane import costs rose by 50%, prompting domestic refining and chemical enterprises to shift to alternative markets such as Russia and the Middle East.
Supply Chain Reconfiguration: Chinese companies with 98% ethane import dependence (e.g., Satellite Chemical) are accelerating the layout of Middle Eastern gas sources, with ethane imports expected to decline by 15% in 2025.
II. Price Volatility in China's Petrochemical Market Amid Tariff Pressures
International Crude Oil:
Affected by tariff policies and the global economic slowdown, WTI crude oil futures prices fell to $62.25 per barrel on April 22, a 5.3% decline from the beginning of the month, and Brent crude oil fell to $66.10 per barrel.
China's crude oil imports from the U.S. dropped to 7.9325 million barrels per day (January-February 2025), accounting for 1.7% of total imports, while the shares of Russia and Saudi Arabia rose to 19.6% and 14.3%, respectively.
Differentiated Chemical Prices:
Polyethylene (PE): The spot price of drawing grade PE was 7,224 yuan/ton on April 10, a 2.3% decline from early April, but rising import costs supported price floors.
Polypropylene (PP): The main futures price was 7,186 yuan/ton on April 14, with spot prices ranging from 11,000 to 15,000 yuan/ton. PDH process enterprises were forced to reduce production by 10% due to high propane costs.
PTA: The East China market quoted 4,350-5,300 yuan/ton on April 22, a decline of 8.57% from the beginning of the month, with oversupply and weak polyester demand dragging down prices.
Fluorochemicals: Refrigerants such as R32 were less affected by the new tariffs due to the original 125% tariff rate, with prices stabilizing at 23,000-25,000 yuan/ton.
III.Supply Chain Adjustments in China's Petrochemical Industry Under Tariffs
Accelerated Raw Material Substitution:
Ethane: Of China's 5.53 million tons of ethane imports in 2024, 98% came from the U.S. After tariff hikes, companies shifted to gas sources in Qatar and Australia, with 2025 import costs expected to increase by 12%.
Propane: With an 84% import dependence (50% from the U.S.), companies accelerated the shift to Middle Eastern LPG purchases after the 84% tariff was imposed. PDH plant capacity utilization fell from 75% to 68%, and enterprises such as Shandong Haike and Zhejiang Xingxing postponed new capacity launch plans.
Domestic Capacity Expansion:
Projects such as the second line of Inner Mongolia Baofeng Coal-based New Materials (500,000 tons/year PE) and the fourth line of Zhenhai Refining & Chemical (500,000 tons/year PP) will be put into operation in Q2, with an estimated 2 million tons of new polyolefin capacity added throughout the year.
The first batch of petrochemical new material processing value-added business in Hainan Free Trade Port was implemented. Sinopec Hainan Refining & Chemical reduced costs by 450,000 yuan through the "duty-free processing value-added" policy, promoting import substitution of high-end materials.
Technological Breakthroughs in Coal-based Chemistry: The promotion of low-protein feed technology has reduced soybean meal demand, and insect protein R&D projects have covered 12 provinces, impacting traditional petrochemical derivative markets.
International Supply Chain Diversion:
DuPont's OLED material supply contracted due to antitrust investigations, prompting domestic companies such as Wanhua Chemical and Puyang Huicheng to accelerate substitution. Domestic OLED material imports fell by 27% in March compared to the previous year.
IV. Sales, Inventory, and Regional Diversification in China's Tariff-Affected Petrochemical Market
Domestic Demand Expansion:
Apparent consumption of chemicals grew against the trend in Q1: polyethylene (+0.8%), synthetic resins (+0.8%), and polyurethane (domestic demand share rose to 65%).
New Energy Drive: Photovoltaic EVA prices rose against the trend by 2.1%, and wind power epoxy resin demand increased by 18% year-on-year.
Downstream Industry Pressures:
Textiles and Apparel: Clothing export volumes increased by 32.3% in March, but April tariff policies caused terminal order delays, with polyester load expected to drop from 85% to 78%.
Automotive Parts: The U.S. 25% tariff on imported vehicles forced domestic modified plastic enterprises (e.g., Kingfa Sci. & Tech.) to set up factories in Mexico, reducing export costs by 18%.
Emerging Markets: Southeast Asian entrepot trade surged, with Vietnam and Indonesia undertaking Chinese polyester bottle chip (+38.7%) and staple fiber (+38.7%) exports, increasing their share of the ASEAN market to 28%.
Inventory Pressures:
PTA: Inventories at major East China ports exceeded 1 million tons, a year-on-year increase of 22%, with traders cutting prices for promotions, squeezing processing fees to 400 yuan/ton.
Methanol: Port inventories were 569,800 tons on April 9, a year-on-year decrease of 4.63%, but inventory accumulation in South China intensified regional price disparities.
V. Import-Export Data: Tariff-Driven Market Reconfiguration in China's Petrochemical Sector
Export Setbacks and Market Shifts:
Polyethylene: Exports to the U.S. fell by 47% year-on-year in January-February 2025, with enterprises shifting to Southeast Asian markets. Vietnam and Indonesia accounted for 38%.
PTA: Cumulative exports reached 655,000 tons in January-February, a year-on-year increase of 14.9%, mainly flowing to Oman (13.8%) and Vietnam (12.7%), with the U.S. market share below 1%.
Import Substitution and Policy Dividends:
Ethane: A new ethane tariff item was added in January 2025, with the import tax rate reduced to 1%. Enterprises such as Satellite Chemical saw a cost reduction of 110 million yuan, promoting the expansion of light hydrocarbon chemical capacity.
Crude Oil: China's crude oil imports fell by 1.9% year-on-year in January-February, but natural gas imports grew by 9.9%. U.S. LNG exports to China hit zero due to tariffs, shifting to Europe (58% of U.S. exports).
High-End Materials: Import tariffs on cycloolefin polymers and ethylene-vinyl alcohol copolymers were reduced to 5% and 6.5%, respectively, stimulating demand in domestic semiconductor and new energy sectors. Imports increased by 21% in March year-on-year.
VI. Market Outlook: Short-Term Risks and Long-Term Opportunities in China's Petrochemical Tariff Environment
Short-Term Risks:
The U.S. "reciprocal tariff" on China may further rise to 150%, facing a cliff-like decline in demand for products with an export share of over 40%, such as plastic films and PVC gloves.
Rising ethane and propane import costs may expand the loss-making ratio of PDH plants to 30% in 2025, forcing industry consolidation.
Long-Term Opportunities:
Domestic Substitution Acceleration: The import dependence rate in fields such as OLED materials and high-end polyolefins is expected to drop from 45% to 30%, benefiting enterprises such as Wanhua Chemical and Rongsheng Petrochemical.
Green Transformation: The share of ethylene production from ethane cracking is expected to rise from 18% in 2024 to 25% in 2026, with policies driving the low-carbon upgrading of the industry.
Data Sources: National Development and Reform Commission, General Administration of Customs, CCM