FocusAsia EPDM to stay soft in near term as supply outstrips demand

04 December 2012 06:41  [Source: ICIS news]

By Helen Yan

EPDM is used in a wide range of applications, including gaskets and window seals in the automotive industry, as well as roofing membrane and electrical insulation in the construction industry.SINGAPORE (ICIS)--Asia has an abundant supply of ethylene propylene diene monomer (EPDM) that will likely depress prices in the near term amid weak demand from the automotive sector, a major downstream of the product, industry sources said on Tuesday.

Traders and suppliers have been offloading surplus stocks at discounted prices as 2012 draws to a close, they said.

Prices may only recover in January 2013, in the weeks leading to the Chinese Lunar New Year on 10 February, market sources said.

EPDM prices for the medium ENB (ethylidene norbornene) grade were at $3,300-3,400/tonne (€2,541-2,618/tonne) CFR (cost and freight) in China and southeast Asia; and at $3,200-3,250/tonne in price-sensitive India in early December, down by more than $100/tonne from a month ago, according to ICIS.

Medium ENB grade is the most actively traded in the EPDM market, and ICIS will launch a pricing report on the product on 5 December.

Asia is the largest and fastest growing EPDM market, accounting for more than 40% of global demand. By 2015, the region’s EPDM capacity is expected to increase by about 65% to more than 580,000 tonnes/year, industry sources said.

The automotive industry is the key driver of growth in regional EPDM demand, with a 45-55% share of total consumption in Asia.

“We expect demand to only pick up from mid-January next year as buyers may have to re-stock their inventories before they head off for the Lunar New Year holiday,” a seller said.

Trade usually slows down in Asia during the Lunar New Year, which is usually celebrated for a whole week in China. Hong Kong, Malaysia, Singapore, South Korea and Taiwan also observe the holiday.

EPDM is used in a wide range of applications, including gaskets and window seals in the automotive industry, as well as roofing membrane and electrical insulation in the construction industry.

Buyers have been showing reluctance to build up EPDM inventory towards the end of the year, they said.

“Several buyers have locked in their December requirements last month and would not need to purchase any cargo in December,” a distributor said.

EPDM demand and prices are not expected to rebound with the global automotive industry remaining weak, a trader said.

The global economic downturn forced several major auto-makers – including General Motors, Ford Motor and Peugeot – to cut jobs and reduce output at their plants in debt-ridden Europe.

In Asia, the territorial spat between China and Japan over some uninhabited islands in the East China Sea has led to a slump in demand for Japanese vehicles in China. In response to weak demand, Japanese car majors such as Toyota, Nissan and Honda have cut production at their China plants.

“The current market sentiment is very weak and customers are asking for further discounts for December shipments. Our margins are negative and we will not fix any shipments in December,” a Japanese EPDM producer said.

Further adding downward pressure on EPDM prices in Asia is the flow of deep-sea cargoes from Europe, which has added to the woes of the Asian suppliers.

“The suppliers of Europe-origin material were very active in the past two months, but we expect the flow of deep-sea cargoes from Europe to slow down as the year is drawing to a close,” a supplier said.

“Hopefully, buying sentiment will improve in mid-January next year prior to the Lunar New Year,” he added.

($1 = €0.77)

Request a free sample of ICIS Asia EPDM pricing report

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Helen Yan
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