Pune, India – The global EPDM market size is estimated to be $2.5 billion in 2021 and is projected to reach $3.6 billion by 2026, at a CAGR of 7.2 percent between 2021 and 2026, according to Research and Markets. The EPDM market is driven by recovery of automotive sector during the forecast period. APAC is dominating region for automotive sector in the countries like China, India, Japan and other Southeast Asian countries.
In 2020, the EPDM market declined by 12.9 percent in terms of volume, compared to 2019, due to the COVID-19 pandemic. The supply chain disruption and decline in end use industries impacted the EPDM market in 2020, amid the pandemic. The raw material required for EPDM (ethylene and propylene) declined due to a reduction in crude oil exploration and production activity amid the pandemic. The end use industries like automotive also showed reduction in production by 26 percent for the first three quarters of 2020 compared to the similar period in 2019. The decline in demand from end use industries further impacted EPDM production.
The automotive sector has been declining since 2018-19. The slowdown in the economy, new emission standards, a shortage of semiconductor chips and a shift towards renting a car over owning a car were some of the reasons for the decline. Due to the pandemic, the demand for automotive further declined in 2020. Asia has a significant market for automotive. The region accounts for more than 50 percent of global automobile production. China, India, Japan and other South Asian countries are major regions involved in automotive production. The technological development and innovation in the automotive sector will enhance the market. In China, even though the automotive sector declined initially due to COVID-19, according to the China Association of Automobile manufacturer, vehicle production in the subsequent month increased for the same period in 2019. The demand for new energy vehicles (electric vehicles and hybrid vehicles) increased in the market. The automotive sales for 2020, 2019 and 2018 were 25.28 million units, 25.76 million units and 28.04 million units, respectively. In the second half of 2020, automotive sales surpassed the 2017-2018 level. The automotive industry in Asia is expected to recover by 2022 with steady improvement in the Chinese automotive industry.
The demand for EPDM depends on the demand from end-use industries such as automotive and construction. The EPDM market faces oversupply due to an increase in production capacities in the U.S. and Asia. The companies are reducing their production of EPDM due to fluctuations in demand from end users. The automotive sector is the largest consumer of EPDM. The decline in the production of automobiles reduced the demand for EPDM. The cheaper EPDM from the Middle East countries also resulted in the reduced demand and price for EPDM. In 2019, the price of EPDM in Asia fell from $2,000-$2,250/ton CIF (cost, insurance and freight) to $1,500-$1,750/ton CIF (cost, insurance and freight). The prices further declined in 2020 due to the COVID-19 pandemic; however, it has steadily increased in the subsequent month to the pre-COVID level. SK Global Chemical Co., Ltd. (South Korea) shut down an EPDM manufacturing plant in Ulsan, South Korea, due to the oversupply of EPDM in 2020.
The technological shift in the automobile sector regarding electric vehicles (EV) is growing progressively. The sensitivity towards the environment and the increase in demand for zero-emission vehicles are a few factors supporting the growth. According to the National Investment Promotion and Facilitation Agency, the EV market is expected to register a CAGR of 44 percent between 2020 and 2027 in India. According to the China Association of Automobile Manufacturers (CAAM), by 2025, new energy vehicles (NEV) will account for 25 percent of the total vehicle sales in China.
The growth in EVs will also mean a change in automotive parts compared to internal combustion engines (ICE). The rubber parts in a vehicle include weather strips, grommets, o-rings, belts, wiper blades, hoses and gaskets, vibration parts and brake-clutch parts. An EV does not have a fuel and engine system. Therefore, the total weight of rubber used in EV is reduced by 30 percent compared to ICE. In EVs, EPDM finds application in cable insulation for fast charging technology. EPDM is also used for thermal insulation in such vehicles. The temperature and electric resistance of EPDM makes it a suitable material to be used in high temperature and high voltage areas.
China is a significant market for EPDM. Many global companies, such as Dow Inc., Exxon Mobil and Arlanxeo, export EPDM to China. The government of China has imposed anti-dumping duties on the import of EPDM. In 2020, China imposed anti-dumping duties on the import of EPDM from the U.S., Korea and the European Union. These duties range from 12.5 percent to 222 percent for a period of five years. The reason for anti-dumping duties is because the products are entering the market at below the normal price of the product. The domestic industries were suffering as a result of the low price of imported products. The tariff rates are in triple digits (above 200 percent) for imports from the U.S. and in double-digits for imports from Europe and South Korea. According to the International Trade Centre (ITC) trade map, China is the largest importer of EPDM at 19 percent of global imports in 2019. The U.S. contributes 28 percent to the total imports to China, followed by South Korea and Saudi Arabia. Due to anti-dumping duties, the EPDM imports from these countries are expected to decline in the future.
While anti-dumping duties will impact global companies, such as ExxonMobil Corporation and Dow Inc. that export to China, it will help the growth of domestic companies in China.
Automotive is the largest application in the EPDM market. EPDM accounts for about 50 percent of total rubber used in car, excluding tires. It is used as used as gaskets, o-rings, hoses, grommets, weather stripping seals and other under-the-hood parts in an automobile. The segment account for about 49 percent of the market share of EPDM in 2020. The sector is in a declining phase for the past two years (2018-2019) due to the global economic slowdown. However, the segment in expected to recover in the forecast period. Moreover, the focus towards electric and hybrid vehicle will provide new opportunities for EPDM manufacturers.
APAC accounted for the largest share of the EPDM market in 2020, followed by North America and Europe. The use of EPDM is expected to witness the highest growth in the APAC region during the forecast period. The market in this region is driven by the recovery of the automotive sector in China, India and Southeast Asian countries. Global automobile manufacturers are investing in APAC countries in establish their production plants to enhance their market presence in the region. China is the significant market for automobile and the largest importer of EPDM in the world. The focus towards the development of new energy vehicles (NEVs) to reduce the carbon footprint will drive the automotive industry in China, which will further enhance the demand for EPDM during the forecast period.
The leading players in the EPDM market are Arlanxeo (Netherlands), Dow Inc. (U.S.), Exxon Mobil Corporation (U.S.), JSR Corporation (Kumho Polychem Co. Ltd.) (South Korea), PetroChina Company Limited (China), Versalis S.p. A. (Italy), SK Global Chemical Co., Ltd. (South Korea), Sumitomo Chemical Co., Ltd. (Japan) and Mitsui Chemicals, Inc. (Japan).