Singapore itself does not produce oil or natural gas, but has developed into one of the world's most important energy hubs. But after three months of the ongoing Middle East war, this city-state known as the 'Houston of Asia' has begun to struggle as it strives to meet the region's fuel needs. A senior executive of a global commodity trader said, "We can see the impact of energy shortages directly from here." As the global crisis enters its most dangerous stage, a more severe test is approaching: if the Strait of Hormuz cannot be fully opened for exports, people are concerned that oil prices may further soar.
Oil prices plummet by 20%, triggering a chain reaction! Boosted by the expected escalation of the US Iran ceasefire agreement, international oil prices experienced the most devastating single month drop in nearly six years in May. The Brent crude oil July contract and WTI July contract fell sharply by nearly 20% and 17% respectively, marking the worst monthly performance since March 2020. However, just as the market was immersed in optimism about peaceful transactions, the negotiation process was filled with great variables: Iran's attitude was tough, clearly stating that it would never be in a weak position, nor would it make any concessions or compromises to the United States; Meanwhile, US President Trump has also postponed the final decision on the relevant agreement.
Thursday (June 4th) Organic Silicon Market Observation: Weak demand for silicone oil becomes the core constraint, and the June market is difficult to break the deadlock
The core contradiction in the current organic silicon and silicone oil market is highly concentrated on the weak performance of the demand side. Under the suppression of sluggish terminal demand, downstream enterprises generally adopt a wait-and-see attitude, resulting in few new orders and the entire industry chain being in a stalemate of consolidation. The weakness on the demand side not only limits the upward space of the market, but also poses a severe test to the pricing strategy of upstream enterprises.
In the silicone oil sector, the sluggish demand is particularly evident. Due to the dual constraints of weak terminal demand and high raw material costs, the price of silicone oil is in a dilemma of rising and falling. At present, manufacturers prioritize the delivery of low-priced orders and long-term contracts in the early stage of supply, and there are very few newly developed spot orders. Most production enterprises are deeply trapped in the dilemma of cost inversion, and the operating rate continues to decline. As of June 3rd, the mainstream price of methyl silicone oil in China remains at 16200-16800 yuan/ton, the price of cracked silicone oil is 13800-14200 yuan/ton, and the price of foreign brand agents such as Dow and Wacker is about 20500-21500 yuan/ton. Despite a slight decrease in DMC and silicone ether prices, the overall price remains relatively high for the year, and the silicone oil market, lacking favorable support, can only passively wait for demand to recover.
In terms of upstream individual factories, the sluggish demand on the demand side has also led to intensified competition between upstream and downstream. Entering Thursday, influenced by the mentality of "buying up instead of buying down", most individual manufacturers will focus on digesting the backlog of orders in the early stage. Although the nominal price of DMC is still between 14800-15100 yuan/ton, the actual transaction price of core major players has dropped to around 14300 yuan/ton. In response to insufficient demand, individual factories continue to operate in a "price for quantity" manner, attempting to achieve order stability through certain bargaining and concessions. At the same time, the wait-and-see sentiment in the middle and lower reaches is essentially an accumulation of bearish forces. Once the actual production reduction in the upstream is lower than expected, this force will transform into downstream reverse price pressure behavior, thereby bringing greater downward resistance to market prices.
Overall, the key to breaking the market in the short term lies in whether the 40% reduction in production by individual factories is genuine, as well as the intense competition between it and the downstream mentality of 'waiting for a drop to buy the bottom'. Based on the analysis of the supply and demand pattern, it is expected that the price of organic silicon market will show a narrow downward trend in the short term, and downward pressure still exists.
Where is the breaking point of the market going to be next? We still need to closely monitor two indicators: the actual supply changes of trimethyl and silicone ether, as well as when downstream manufacturers such as chemical fiber, printing and dyeing, electronics, plastics, leather, rubber, and daily chemical will start to fully replenish inventory. If nothing unexpected happens, the prices for the entire month of June are expected to continue to remain so 'stiff'.