Domestic EPDM Supply Lags as Consumption Grows 17% Annually

By Guan Ying, PetroChina Research Institute of Jilin Petrochemical Company

Ethylene propylene diene monomer (EPDM), also known as ethylene-propylene elastomer, is the third largest variety of synthetic rubber after styrene-butadiene rubber and polybutadiene rubber.

I. EPDM in short supply

PetroChina Jilin Petrochemical Company is China’s only EPDM producer. Its second production line, capable of 25 kt/a, was put into trial production in 2010, making the national capacity 45 kt/a. The company’s total output was 21.46 kt in 2011. Nevertheless, the demand for EPDM in China greatly exceeds the supply: apparent consumption was 242.4 kt in 2011. The domestic supply/demand situation of EPDM from 2006 to 2011 is listed in Table 1.

Table 1 Supply/demand of EPDM in China, 2006-2011  (kt)
Year    2006    2007    2008    2009    2010    2011
Output    20.1    20.1    18.5    17.7    19.3    21.5
Import     87.9    114.7    132.4    174.7    217.5    223.0
Export     2.3    5.0    8.3    2.9    2.5    2.1
Apparent Consumption    105.7    129.8    142.6    189.5    234.3    242.4

   China is the world's fastest-growing EPDM market, maintaining rapid growth for many years. However, the market share of domestic products has decreased continuously since production capacity here has not increased correspondingly. In the last five years, due to the increase of China’s GDP and car production, consumption of EPDM in China was increasing at an average annual rate of 17%.

1. Domestic EPDM products are in short supply and variety is inadequate.
There have never been more than eight varieties of EPDM produced in China. The varieties of EPDM change according to market demand and are mainly used in products such as automobile inner tubes, heat-resistant hoses, sealing strips, sponges, electrical insulating materials and rubber products. The primary products, including binary ethylene-propylene rubber (Models J-0010, J-0030, J-0050 and J-0043) and ternary ethylene-propylene rubber (Models EPDM2070, EPDM4045, etc.), are mainly used for modifying lubricants and manufacturing other low-end products.

2. Imported EPDM products are complete in variety and have wide application fields.
Although the capacity of EPDM has reached 45 kt/a in China, the total output is only about 21.5 kt/a. Due to the rapid growth in demand, the import volume increases year-by-year. The import volume of EPDM in 2007 was 115 kt, and the figure climbed to 223 kt in 2011 with an average annual growth rate of 18%. The import dependency of EPDM in China reached 92% in 2011. Foreign suppliers of EPDM include Dow, Exxon, Mitsui, JSR, Lanxess and SK.

3. New capacity to be built in China is huge.
The EPDM investment boom in recent years is driven by the huge gap between supply and demand and market potential in China. More than ten EPDM plants with a total capacity of almost 600 kt/a, including one planned by a highly competitive joint venture between Sinopec and Mitsui, will be constructed in the next few years. The details of these projects are shown in Table 2.

Table 2 EPDM projects to be constructed or reported on the internet in China
Company    New capacity(kt/a)    Status
Shanghai Sinopec-Mitsui Elastomer Co., Ltd    75    Plan to employ the metallocene catalyst technology of Mitsui, expect to complete at the end of 2013

Shandong Yuhuang Chemical Co., Ltd    50    Technology from Fastech (Italy)

Shaanxi Yanchang Petroleum Group    50    Raw materials from the methanol-to-olefin unit, technology from Fastech (Italy), plan to put into production in 2014

Fushun Hi-tech Development Zone    50    Invested by Lanxess (Germany)

SK Group (South Korea)    50    Official contract signed

Chongqing Changshou Chemical Co., Ltd    80    Plan to build a joint venture in Kuytun City

Sinopec Beijing Yanshan Company    40    Planning on the horizon, to employ technology with independent intellectual properties

Nanjing Chemical Industry Park    50    

Beijing Petrochemical New Materials Hi-tech Industry Base    80    

Yangzhou Chemical Industry Park    50    Listed in the 12th Five-Year Plan
Total (theoretically)    > 600    

   The capacity of EPDM in China is expected to exceed 200 kt/a after 2014. Considering that the domestic market is currently dominated by foreign products, the supply of EPDM may exceed the demand in the near future.

II. Outlook

1. Featured research areas have preliminarily formed in Jilin Petrochemical Company.
Substantial technical progress for EPDM has been made by Jilin Petrochemical Company in the areas of catalysts (including vanadium-based catalysts, metallocene catalysts and late transition metal catalysts) and varieties of products (including J-0010 series, products with bimodal distribution of molecular weight and long chain branching products). The completion of the 200 t/a pilot production line, which is the only one in China, will not only serve as a strong R&D platform for the company, but also provide strong technical support for front-line production units.

2. Two production bases, one in north China and the other in south China, may form.
The 75 kt/a EPDM plant of Shanghai Sinopec-Mitsui Elastomer Co., Ltd, which is expected to be completed and put into production in 2013, is now under construction. It is expected that after 2014, great changes in China’s pattern of producing EPDM will take place with the newly built capacity put into production; Jilin Petrochemical Company will no longer outshine others; two production bases, one in north China and the other in south China, may form and compete with each other; supply shortages in the domestic EPDM market will be substantially relieved. If two EPDM plants, each having a capacity of 50 kt/a, one by Shandong Yuhuang Chemical Co., Ltd and the other by Shaanxi Yanchang Petroleum Group, are put into production successfully, the domestic EPDM market will be saturated.

3. High-quality POE, with its lower price, is partly replacing EPDM.
Since the price of EPDM ran high from 2009 to 2010, some manufacturers started to replace EPDM with polyolefin thermoplastic elastomers (such as the copolymer of ethylene and α-olefin, POE), which are cheaper and excellent in performance.

4. Domestic EPDM supply structure will be diversified.
With rationalization of Jilin Petrochemical Company’s product portfolio by constructing a third production line, and completion of the 75 kt/a EPDM unit by Sinopec and Mitsui, the domestic EPDM supply structure will be diversified and a thriving market consisting of various varieties of products such as metallocene synthetic EPDM and traditional solution method EPDM can form. Then the import dependency will decrease and the market competitiveness of domestic products will be further enhanced.