By Arathy Somasekhar and Georgina McCartney

HOUSTON (Reuters) -Energy Transfer said on Wednesday it received a letter from the U.S. government requiring a license to export ethane to China, adding that the U.S. export terminal operator will file for an emergency authorization to continue exporting.

The move, which comes amid a broader trade fight between the U.S. and China including over Beijing's curbs on rare earths exports, adds pressure to U.S. ethane exports.

It forces producers of the natural gas byproduct to seek alternate buyers and raises costs for Chinese petrochemical firms, which rely almost exclusively on U.S. producers for ethane imports that are used to make plastics and chemicals and also for heating and cooking.

Another U.S. ethane exporter, Enterprise Products Partners said it received notice on Wednesday that the U.S. Commerce Department intends to deny its emergency requests to export three proposed cargoes of ethane totaling around 2.2 million barrels to China.

Enterprise had filed the emergency authorization requests after it received a letter requiring license authorization on May 23. Energy Transfer said it got its letter on June 3.

Enterprise shares were down 1.2% in after-market trading, while Energy Transfer's shares were down 2%.

The letters from the Bureau of Industry and Security, an agency of the Commerce Department, said exports of ethane pose an unacceptable risk of military end-use in China, according to both companies' filings. The BIS did not immediately respond to requests for comment on both companies.

The denial of Enterprise's emergency requests calls into question whether this is just a short-term disruption, said Samantha Hartke, Vortexa’s head of Americas analysis.

"Near-term cargo reshuffles or resales could be necessary, as would a greater dependence on domestic storage," she said, adding that short positions in ethane were piling up on Wednesday.

TRADE WAR

The U.S. and China are locked in an ongoing trade war after U.S. President Donald Trump imposed sweeping tariffs in early April.

The Commerce Department said last week it was reviewing exports of strategic significance to China, while noting "in some cases, Commerce has suspended existing export licenses or imposed additional license requirements while the review is pending."

China's foreign ministry said last week that such U.S. practices disrupted the stability of global supply chains and that Washington was weaponizing tech and trade issues to shut out and persecute China.

Energy Transfer said it intends to apply for the license, while Enterprise has not commented on its plans for a license. The companies are among the top exporters of ethane from the U.S.