EPR: New Competition Pattern Emerges

By Guan Ying, PetroChina Jilin Petrochemical Co., Ltd. Research Institute

Production

A flurry of new capacity sharply increased China’s total ethylene-propylene rubber (EPR) capacity from 45 kt/a in 2013 to 370 kt/a in 2016. The character of the market turned from supply shortage to capacity surplus. Table 1 shows the major producers.
More EPR construction is planned in China in the next few years. The combined capacity of new EPR units is expected to exceed 520 kt/a. Table 2 shows the details.
Shaanxi Yanchang Petroleum Group Yanan Energy Chemical Co., Ltd. signed a technical contract on an EPDM production unit in Xian with FasTech of Italy. The capacity of the unit is to be 50 kt/a. Raw material monomer used in the project is to come from an MTO unit being constructed in the same area today. Also, Chongqing Changshou Chemical Co., Ltd. and Zhejiang Huashan Chemical New Material Co., Ltd. each plan to construct an 80 kt/a EPDM unit. If these projects are put on stream, China’s EPR capacity is likely to exceed 500 kt/a in 2019.

Table 1    Major producers of EPR in China, 2016

Producer    Capacity (kt/a)    Startup time    Commodity     Remarks
Lanxess (Changzhou) Co., Ltd. (Changzhou of Jiangsu)    160    2015    Keltan    2 units in Changzhou, construction launched in 2012, production started in April 2015, ACE catalytic technology used
PetroChina Jilin Petrochemical Co., Ltd. (Jilin)    85    1998    Kunlun    Mitsui-patented technology introduced for the first 20 kt/a unit in 1998, 25.2 kt/a added in 2009, 40 kt/a more added in 2014
Shanghai Sinopec Mitsui Elastomers Co., Ltd. (Shanghai)     75    2014    EPT    Production started in November 2014, Mitsui metallocene technology, 50% stake held by Sinopec and 50% stake by Mitsui
SK Global Chemical Co., Ltd. (Ningbo of Zhejiang)    50    2015    Suprene    Production started in February 2015
Total     370            


Table 2    New EPR capacity in China, 2017-2019

Company    Scale (kt/a)    Process    Patent holder    Progress
Shaanxi Yanchang Petroleum Group Yanan Energy Chemical Co., Ltd.    50    Solution polymerization    FasTech of Italy    Under construction
Shandong Wanda Group Tianhong Chemical Co., Ltd.    90            Construction launched in 2012
CNOOC Energy Development Co., Ltd. Huizhou Petrochemical Co., Ltd.    100    Suspension polymerization    Versalis of Italy    First-phase 50 kt/a under construction
Liaoning North Chemical Industry Group Co., Ltd.    200    Suspension polymerization    Versalis of Italy    Contract signed
Total     440            


Consumption

It can be seen from Table 3 that the apparent consumption of EPR in China has risen year-by-year since 2012. Average annual growth was around 11.1% during 2012-2016.
EPR consumption in China is concentrated mainly in automotive component manufacture, polymer modification, making construction materials, building sports facilities, making oil product additives and making electric wires/cables. Consumption for automotive components accounted for 45% of the total in 2016, while 11% was used for polymer modification, 11% for construction materials, 9% for sports facilities, 8% for oil product additives, 8% for electric wires/cables and around 8% for other purposes. The automobile industry is still the most important consumption sector.
The automobile industry in China has developed rapidly in recent years. It will keep increasing at an annual rate of 5-6% during 2014-2019, promoting consumption growth of EPR.
The manufacture of construction materials is another rapidly growing sector consuming EPR. Average annual growth of EPR consumption there during 2014-2019 is expected to exceed 12%. Demand for EPR in this sector will likely reach 55 kt in 2019.
Owing to EPR’s excellent dielectric behavior, water resistance and low-temperature impact resistance, it can be used in the insulating layers of electric wires/cables. Average annual growth of consumption in this sector is expected to reach 12% during 2014-2019. With such growth, demand for EPR will reach 38 kt in 2019.
It can be seen from Table 4 that automotive components and polymer modification will remain the two biggest EPR consumers in China for the next few years, while construction materials and electric wires/cables will develop most rapidly.
The amount of EPR imported to China has declined year-by-year since 2014. It fell from 301 kt in 2014 to 240 kt in 2016. The domestic supply is expected to increase constantly after 2017, and import will decline accordingly. Some high-end and special varieties will however still mainly be imported from abroad.

Table 3    EPR supply/demand in China, 2012-2016  (t)

Year    2012    2013    2014    2015    2016
Capacity (t/a)    45 000    45 000    160 000    370 000    370 000
Output    19 141    20 113    34 824    100 000    120 000
Import amount    211 799    252 122    301 061    264 796    239 658
Export amount    3 411    4 967    4 422    5 168    12 729
Apparent consumption     227 529    267 268    331 481    359 628    346 929


Table 4    EPR consumption pattern in China in 2016 and forecast  (kt)

    Automotive components    Polymer modification    Construction materials    Sports facilities    Oil product additives    Electric wires/cables    Other    Total
2016    177    40     39    33    30    27    27    373
2019    211    46    55    39    35    38    33    457
Average annual growth during 2014-2019 (%)    6.0    5.0    12.0    6.0    6.0    12.0    7.0    7.1


Competition pattern

Foreign-owned units and joint venture units dominate EPR production in China. Production tends to be concentrated and large-scale. Products are diversified.
PetroChina Jilin Petrochemical Co., Ltd. and SK Global Chemical Co., Ltd. mainly produce traditional varieties through solution polymerization in the presence of vanadium-aluminum catalyst. Shanghai Sinopec Mitsui Elastomers Co., Ltd. mainly produces EPR through high-temperature solution polymerization in the presence of metallocene catalyst. Lanxess (Changzhou) Co., Ltd. mainly produces EPR through solution polymerization in the presence of non-metallocene single-site catalyst. EPR consumption in the manufacture of automobile components faces price competition from polyolefin thermoplastic elastomers (POE).