Petrochemical peace? China reopens the tap on US propane

For a market that’s spent months bracing for a full-blown plastics panic, the latest development is a sigh of relief wrapped in a propane shipment.

China has quietly resumed U.S. propane imports—an unspoken ceasefire in what had been a smoldering front in the broader U.S.–China trade war. After weeks of threats, finger-pointing, and disrupted tanker routes, at least four cargoes are now en route to Chinese ports, and the plastics supply chain—arguably one of the most underpriced systemic risks—just dodged a bullet.

Rewind to April: Chinese plastics manufacturers were on the brink. U.S. ethane and propane—the lifeblood of their production lines—had gone missing as trade war skirmishes shut the taps. Tankers diverted. Contracts stalled. Panic quietly spread across chemical alleyways from Shandong to Shenzhen. The risk? A global plastics crunch that would ripple far beyond factory floors into packaging, autos, electronics, and everything in between.

Then came the détente—or at least something shaped like one.

This week’s London talks didn’t produce a deal, but they did stitch together a face-saving framework that builds off May’s Geneva consensus. The practical translation? China agrees to loosen its control over rare earths, while the U.S. guarantees continued access to China-specific chips for mainland China's burgeoning tech sector. In the margins, energy trade is also finding clearance.

That’s how we landed here—Bloomberg reports that Chinese buyers have ramped up U.S. propane purchases in June, including a July cargo locked in at just an $8/ton premium over the Argus Far East Index—well off recent highs near $22. Price-driven opportunism? Sure. But in geopolitics and petrochemicals, you take détente however it comes.

And make no mistake—this isn’t just about plastics. This is about leverage. The U.S. is one of the world's biggest suppliers of liquefied petrochemical feedstocks, and China is the undisputed global plastics engine. When these flows get choked, it’s not just factories that stall—it’s inflation that leaks into everything from shampoo bottles to semiconductors.

For now, the bleeding has stopped. Chinese plastic producers live to fight another day. But this détente comes with an expiration date: the 90-day tariff reprieve Trump granted post-Geneva wraps up in early August. Unless cooler heads prevail, the tape could be pricing in another disruption premium before summer’s out.

In trader speak: the tape has moved from panic to pause, but this is still a high-beta détente.

Plastic may be cheap, but the geopolitical fragility around it isn’t.