By Wang Yuying, Wu Shihui, Research Institute of PetroChina Jilin Petrochemical

Analysis and prediction of production

Ethylene-propylene rubber is divided into two categories: ethylene-propylene-diene rubber (EPM) and ethylene-propylene-diene rubber (EPDM) according to the monomer units in the polymer molecular chain. In 2022, there were still only five ethylene-propylene rubber manufacturers in China, with no newly-added installations and the total production capacity remained at 395 000 t/a. The current status of domestic ethylene-propylene rubber manufacturers and their units in 2022 is shown in Table 1.

From the distribution of production capacity, East China was the main area, with a production capacity of 285 000 t/a, accounting for 72.15% of the total. East China is the distribution center of auto parts industry which is the main downstream of China's ethylene-propylene rubber. Therefore, it is obvious that the production of ethylene-propylene rubber is close to its consumption. The regional distribution of domestic ethylene-propylene rubber production capacity in 2022 is shown in Figure 1.

Figure 1 Regional distribution of China's ethylene-propylene rubber production        capacity in 2022

At present, ethylene-propylene rubber is in the mature stage of the product life cycle, having no sufficient appeal to the investors. In the next few years, there will be few domestic ethylene-propylene rubber projects under construction, and there are only two manufactures with production capacity growth expectations. One is Shandong Tongzhou Chemical Co., Ltd. ’s ethylene-propylene rubber unit with an annual output of 50 000 tons. However, this unit has been shutdown for a long time due to funding gap and other reasons, and there are still large variables in whether to resume construction in the later period. The other is Jilin Petrochemical Co., Ltd.’s proposed unit with a capacity of 40 000 t/a, which is expected to enter the trial operation stage in early 2024. Therefore, it is estimated that in the next two years, the total production capacity of China's ethylene-propylene rubber industry will have slight rise.

In 2022, China's EPDM output was about 268 900 tons, a fall of about 0.63% compared with 2021, and the average annual capacity utilization rate was about 68.08%. In 2022, more manufacturers launched annual maintenance than those in 2021, which reduced the total output. The changes in China's EPDM monthly output and industry capacity utilization rate in 2022 are shown in Figure 2.

Figure 2 Changes in China's EPDM monthly output and industry capacity utilization   in 2022

In the recent five years, China's EPDM production increased in stages, and the annual output increased from 195 000 tons in 2018 to 268 900 tons in 2022, with a compound annual growth rate of 8.37%. In 2021, affected by the implementation of anti-dumping policy, the import sources were greatly reduced and domestic production increased significantly. In 2022, due to the impact of the pandemic and complex international situation, the output had slightly decreased, down by 0.63% from 2021. The change of domestic EPDM production from 2018 to 2022 is shown in Figure 3.

Figure 3 Change of domestic EPDM production from 2018 to 2022

In 2023, domestic EPDM downstream demand is expected to rebound slightly. At the same time, as the production technology is continuously maturing and the stable operation period of equipment is extended, it is expected that domestic EPDM production will have slight increase in 2023.

Market analysis and forecast

In 2022, the domestic apparent consumption of EPDM was 390 800 tons, a decrease of 4.32% compared with 2021. In 2022, the downstream market had tepid demand for EPDM affected by the scattered pandemic. In terms of monthly consumption, consumption showed a trend of fluctuation. The comparison of EPDM monthly consumption and price trends in 2022 is shown in Figure 4.

Figure 4 Domestic EPDM monthly consumption and price trend comparison in 2022

From 2018 to 2022, China's EPDM market demand presented an "M"-shaped fluctuation. In 2020, the global pandemic was a blow to various industries to varying degrees, and the annual apparent consumption of domestic EPDM dropped by 15%. In 2021, domestic EPDM recovered slightly in downstream consumption, and increased slightly year-on-year. In 2022, affected by the scattered pandemic, there was a slight decline. The supply and demand of EPDM in China from 2018 to 2022 is shown in Table 2.

From the downstream consumption structure, products with large consumption of EPDM included auto parts, rubber products, polymer modification, wire and cable, etc. In 2022, the automotive industry remained the greatest demand filed, accounting for 45% of EPDM consumption, followed by rubber products, polymer modification and wire and cable, accounting for 20%, 10% and 10% respectively.

From the consumption area, the downstream consumption was intensively distributed in East China which accounted the highest proportion of EPDM consumption in China, about 50% of the total consumption in 2022; followed by North China, accounting for about 25%; then, it came to South China, about 15% and other regions, about 10%.

In 2023 and the next few years, the downstream of EPDM will be recovered and develop in a good direction. The automobile industry will still be the main downstream. The real estate in recent years has been irrational performance and neglected so it will have less driving force in home appliances, building sealing and construction pipe belts, and their performance will remain relatively flat in 2023. With the vigorous development of China's infrastructure and rail transit, cable industry will have good prospect. On the whole, China's economy will mainly focus on recovery, and the actual growth rate may be slow. It is expected that China's downstream consumption of EPDM will experience slight increase in 2023.

Import and export analysis and forecast

1. Import 

The import and export statistics of EPDM include ethylene-propylene non-conjugated diene rubber in primary form (40027010) and ethylene-propylene non-conjugated diene rubber in other forms (40027090).

In recent years, China's EPDM imports have shown a decreasing trend. In 2022, the total import volume was about 151 800 tons, a year-on-year slide of about 9.91%. The main reason was that the market demand and prices in Europe and Southeast Asia were slightly better than those in China during the year. In the first half of the year, some foreign companies invested heavily in the European and Southeast Asian markets, and the export volume to China decreased slightly.

From the perspective of import sources, China's implementation of anti-dumping since 2020 has led to changes in the main sources of EPDM imports. In 2022, the top five sources of imports were Saudi Arabia, South Korea, Japan, Italy, and the Netherlands. The total import volume of the five major source countries was about 140 400 tons, accounting for about 92.49% of the total import. The statistics of EPDM import sources in 2022 are shown in Table 3.

From the perspective of import trade mode, China's EPDM import trade mode is mainly general trade, accounting for 85.88% in 2022. The statistics of China's EPDM import trade mode in 2022 are shown in Table 4.

2. Export

China is a net importer of EPDM with a small export volume. In 2021, driven by the tight global supply, Chinese companies increased their exports, with a total export volume of 31 700 tons, a year-on-year surge of 134.81%. In 2022, affected by the overall weakening of foreign demand, the total export was about 30 500 tons, a year-on-year decrease of about 3.79%.

The statistics of EPDM export destinations in 2022 are shown in Table 5. From the details of EPDM export destinations, Asia was the main region. In 2022, the number of EPDM exported to South Korea occupied the first place, a total of 4 569.20 tons, a year-on-year plunge of 48.12%, which was mainly because the demand in South Korea weakened and their local production capacity greatly met the local demand, so the demand for imported goods decreased.

From the perspective of export trade mode, China's EPDM export trade mode is dominated by general trade, accounting for 77.68% in 2022. The statistics of China's EPDM export trade mode in 2022 are shown in Table 6.

Some foreign units are planned to be permanently shut down in 2023. At the same time, with the steady and simultaneous improvement of the quality and output of China’s EPDM products, it is expected that China's export volume will have steady increase in 2023.

Development trends and suggestions

1. Development trend

From the perspective of supply and demand, the production capacity of ethylene-propylene rubber in the world is oversupplied in general, and the development among regions is unbalanced. Asia, including China, will remain an important consumer market for ethylene-propylene rubber in the future, and the competition will become increasingly intensified.

From the perspective of technological development, metallocene catalytic technology, with excellent catalytic activity and strong polymer structure control, will further release its application potential in industrialized units. In addition, the new polymerization technology including non-metallocene single-active central catalyst and advanced post-metallocene catalyst will become a research and development hotspot in the future.

From the development of the consumption field, in the next 5 to 10 years, the application market of EPDM rubber will still be dominated by automobiles and polymer modification. In addition, the building materials, wires and cables are about to become focuses in the product development and research and application expansion in the future.

From the competition of substitutes, traditional ethylene propylene rubber will be impacted by other cheaper elastomers such as thermoplastic polyolefin elastomer (TPO, whose hard segment is polypropylene or polyethylene, and soft segment is thermoplastic elastomer of ethylene-propylene rubber), thermoplastic vulcanizate (TPV), etc. In addition, polyolefin elastomer vinyl copolymer (POE) has replaced ethylene-propylene rubber in many TPO blend rubber formulations and has become a strong competitor to EPDM rubber.

Moreover, rubber modification is an effective means to improve the properties of rubber products and broaden the application fields. In the future, the research on ethylene-propylene rubber modification technology will remain one of the research hotspots.

2. Suggestions

The first is to improve the existing unit technology, further reduce costs and increase efficiency; improve the production efficiency and the output value of economic input; strengthen product quality research, improve product quality and quality stability, and stabilize and increase market share.

The second is to strengthen industry-university-research cooperation, improve industrial technology innovation and continuously enrich the product structure to meet the differentiated needs of the market. In terms of terminal product positioning, it shall increase the proportion of special grades with high technology and high added value, and explore high-end development routes.

The third is to strengthen technical services and advocate product market expansion. On the premise of increasing the application and development of ethylene-propylene rubber, effort should also be devoted to using technical services to support the product market expansion, continuously developing new application fields in the general market and frontier application markets, and expanding the application field of ethylene-propylene rubber.

The fourth is to expand the international vision and well perform in the export market. On the basis of the existing export business, it shall formulate strategic export strategies, adjust price countermeasures, expand foreign customers, and resolve pressure on production and sales.