Suddenly! The continuously sluggish organic silicon market has finally ushered in a "fierce counterattack". Last Friday, a leading enterprise in Shandong suddenly raised its DMC quotation significantly, with a daily surge of 800 yuan/ton, driving the mainstream prices of DMC and D4 to quickly rise to the 12000 yuan/ton mark. This long lost bullish candlestick, like a shot in the arm, instantly ignited the emotions of the entire silicone market.
It should be noted that not long ago, the industry was still trapped in the "darkest moment": DMC prices once fell below 10300 yuan/ton, breaking through the industry's cost line, causing widespread losses for enterprises, and the third quarter report was even referred to as the "worst in the past decade" by the industry. What exactly drove this sudden surge? How will the future be interpreted?
1、 The inevitable rebound after a deep decline?
The price increase this time may seem sudden, but it is actually traceable.
Firstly, the price has already fallen and there is no room for further decline. Long term operation below the cost line has made it difficult for some high cost enterprises to sustain themselves, resulting in a decrease in industry operating rates.
Secondly, the "anti internal competition" policy became the catalyst. Recently, the Ministry of Commerce and other departments have explicitly proposed to rectify "involution style" competition, which has been interpreted by the market as a signal of policy intervention to "rescue the market", greatly boosting market confidence.
Recently, there have been a series of positive signals on the news front, injecting strong momentum into the market. The US has announced the cancellation of the 10% "fentanyl product tariff" imposed on Chinese goods, while the 24% equivalent tariff imposed on China will continue to be suspended for one year. In addition, the US has suspended the implementation of the complex "50% penetration rule" in export controls for one year, and simultaneously suspended its 301 investigation measures against China's maritime, logistics, and shipbuilding industries. These measures have significantly eased trade barriers and created a more favorable external environment for the export of organic silicon products. Given the accelerating pace of global economic recovery, the potential of terminal consumption and industrial production is expected to continue to be unleashed. Market analysis suggests that after entering November, these accumulated benefits are likely to directly trigger a wave of concentrated procurement demand from overseas.
More importantly, a consensus on self rescue in the industry has been formed. According to industry news, several leading companies have reached a consensus that they will adhere to the principle of "no sales at loss, no credit sales" in the fourth quarter, and jointly maintain reasonable profits in the industry. Driven by both policy and industry self-discipline, the market supply and demand pattern is quietly shifting towards a tight balance.
2、 Can the price increase continue? The key is to focus on this point
So the question is: is this round of price increases a flash in the pan, or is it the beginning of a trend reversal?
In the short term, there is some support for price increases. The current social inventory is not high, and there is a demand for replenishment downstream. The mentality of "buying up instead of buying down" will further drive up prices.
However, in the medium to long term, the actual demand from end-users remains the determining factor. If downstream application fields such as electronic products, construction, and silicone products fail to substantially recover and rely solely on supply contraction driven price increases, their sustainability will be greatly reduced.
Industry insiders predict that the price of organic silicon is likely to remain strong and volatile in the fourth quarter. Whether it can break through the high before the beginning of the year still depends on the subsequent policy implementation and downstream order situation.
Price increases directly repair profits, and the cash flow pressure of individual enterprises will be alleviated. The rapid rise in raw material costs has squeezed the profit margins of downstream enterprises, and some downstream enterprises may be forced to follow suit.
In short, this long-awaited price increase is more of an industry's "self redemption" than a "carnival". Under the joint action of policies and markets, the silicone industry is striving to break out of the quagmire of low price competition. However, the fundamental to the healthy development of the industry still lies in technological innovation and demand recovery. How far can the price increase go this time? Let's wait and see.