Asia’s EPDM market may pick up on feedstock spike, tight supply and modest demand

05:20' PM - Wednesday, 20/05/2020

Asia’s ethylene propylene diene monomer (EPDM) market may see upward price potential on rising feedstock costs and as demand recovers gradually with the easing of restrictions which were imposed to contain the spread of the coronavirus.

Demand is expected to pick up slowly when countries re-open their economies and global automotive makers restart their factories in Asia, Europe, Latin America and the US.

“We expect auto production to increase moderately from the current 30% operating ratio to around 50% after June. We expect marginal price increases in EPDM in the coming months,” a trader said.

On 13 May, spot prices of medium ethylidene norbornene (ENB)-grade prices in Asia increased by $50/tonne week-on-week in Asia to $1,350-1,550/tonne CIF (cost, insurance and freight) China, and CFR (cost and freight) southeast Asia and India, ICIS data showed.

In Asia, China and Vietnam have re-opened their economies following the success of their early implementation of stringent restrictions, including mass quarantines, lockdowns, border closures, transport restrictions and travel bans.

China’s vehicle sales in April reached 2.07m units, an increase of 4.4% year on year and 43.5% month on month, according to data from the China Association of Automobile Manufacturers (CAAM).

Soaring feedstock ethylene prices have also added upward pressure on the EPDM price, market sources said.

Feedstock ethylene prices surged by $95/tonne week-on-week to average $565/tonne CFR NE Asia on 15 May, ICIS data showed. Feedstock ethylene prices in southeast Asia hit a nine-week high on the bullish China market and tight supply.

Meanwhile, EPDM supply has tightened due to the shuttering of facilities and ongoing production cutbacks at major EPDM plants in Asia, the Middle East, Europe and the US.

“We understand several EPDM plants are running at reduced rates or may remain shut till June,” a major Asian EPDM supplier said.

PetroChina Jilin’s EPDM plant in northeast China is heard to be running only one 25,000 tonne/year EPDM line, market sources said. Jilin has three lines, with a total capacity of 85,000 tonnes/year, according to the ICIS Supply and Demand database.

Other EPDM plants in China, including SK Performance’s 50,000 tonne/year plant in Ningbo and Mitsui Elastomer’s 75,000 tonne/year plant in Shanghai, were heard shut in mid-March and early April respectively, market sources said.

South Korea’s SK Global Chemical (SKGC) is expected to idle its 35,000 tonne/year plant in Ulsan in the second quarter of 2020, following its plan to shut its No 1 naphtha cracker at the end of this year due to poor margins.

EPDM is used in the automotive industry and construction industries for various seals due to its excellent resistance to environmental factors such as ozone, ultraviolet (UV) and general weathering.

Typical applications are window and door seals, electrical gaskets, waterproofing sheets, water-resistant sealing parts and wire-coating.

The global automotive industry has been battered by the fallout from the coronavirus pandemic.

The Indian automotive industry has seen a steady decline in sales for the past one year and nearly all automakers recorded zero domestic sales in April.

EU passenger car sales fell 76.3% year on year in April, the sharpest fall since records began, as the automotive industry suffered the lockdowns across the 27-country bloc, the European Automobile Manufacturers’ Association (ACEA) said on Tuesday.

US sales of new light vehicles in April fell by nearly 25% month on month and was down by nearly 48% year on year, according to seasonally adjusted annual rates (SAAR) from the US Bureau of Economic Analysis (BEA). - ICIS -

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