The recent chill in the silicone market is pressing, and the price game continues to bottom out. Affected by the collapse of technology stocks and the escalation of the US Iran situation over the weekend, A-shares experienced a "Black Monday" yesterday, with the Shanghai Composite Index falling 2.06%, the Shenzhen Component Index falling 3.48%, the ChiNext Index falling 3.1%, and over 4600 individual stocks falling. The organic silicon sector is also facing a heavy decline, with stocks such as Hengxing Technology and Xin'an Shares falling by the daily limit, while Dongyue Silicon Materials and Huitian New Materials fell by more than 18%
Yesterday, the organic silicon market also experienced a round of concentrated price reductions, with prices from individual factories generally falling sharply, and the price centers of various products moving downwards across the board. The mainstream quotation for DMC has fallen to 13000-14000 yuan/ton, D4 is priced at 13500-13800 yuan/ton, 107 rubber is priced at 13000-14000 yuan/ton, silicone oil is priced at 15000-15500 yuan/ton, and raw rubber is priced at 14000-14800 yuan/ton, with the highest drop of 1600 yuan/ton for 107 rubber; According to market rumors, some individual manufacturers are offering discounted prices with a minimum order quantity of 10 cars and a first in, then out policy. Various signs indicate that the current price is in a low season bottoming out channel, with upstream attempts to exchange liquidity through price reductions, but at the same time shaking the market's judgment of the price bottom.
Faced with the current low price stimulus, midstream and downstream enterprises have some stock up to follow up, but overall efforts are limited. On the one hand, the orders of mid to downstream enterprises themselves are still relatively light, and their confidence in replenishing inventory is insufficient under the pressure of bidding; On the other hand, the procurement strategy of enterprises has shifted from the previous "timing bottom fishing" to the "price linked, batch warehouse building" model. Due to the differentiation of product declines, the replenishment rhythm of silicone rubber and rubber mixing enterprises for 107 rubber and raw rubber also follows a stepped release pattern with the decline. The deeper the decline, the larger the purchase volume, rather than a concentrated explosive entry. This limits the actual transaction scale, and the market supply-demand game continues.
This week, the market will continue its "bottoming out" phase. The upstream side is attempting to rebuild pricing power by reducing production, while the other side is aggressively lowering prices, making it difficult to establish confidence in the middle and downstream, and generally waiting for lower prices to enter. The key to the subsequent rebound lies in whether the upstream can form a unified price bottom line and truly implement the 60% reduction plan. If the reduction in production is implemented effectively, the supply-demand relationship is expected to improve marginally; On the contrary, the pattern of sluggish transactions is difficult to break, and price recovery still needs to wait for substantial changes in fundamentals.
Industrial silicon: On the supply side, under the influence of the wet season, the southwest region continues to resume production and the number of furnaces has increased, while the operating rate of enterprises in the northwest region remains stable and the overall output has increased. On the demand side, the weekly production of polycrystalline silicon has increased, and the main demand for industrial silicon is still to reduce the amount of demand; The price of organic silicon has declined, and the operating rate of individual factories has significantly decreased, resulting in weak demand for industrial silicon.
Overall, the fundamentals of industrial silicon are weak, but the downward space for prices may be relatively limited under the rigid support of bottom costs. As of July 13th, the closing price of the main futures contract Si2609 is 8435 yuan/ton; The quotation for 421 # metal silicon is 9200-9750 yuan/ton. We need to pay attention to the implementation of production reduction news or the boost of policy news in the future.
In terms of operating rate: Currently, individual factories are continuously reducing their load, and the overall operating rate is less than 60%. Although the supply side has significantly tightened, the demand side is weak in taking over, the industry's self rescue effect is limited, the price focus has shifted downward again, and inventory pressure has not eased yet. The future direction will depend on whether individual factories can adhere to the coordinated reduction of production and maintain a low fluctuation in operating rates.
On the demand side: Currently, traditional demand areas are being suppressed by the slowdown in real estate completion and the contraction of export orders, making it difficult to contribute incremental growth in the short term, and the procurement pace of midstream and downstream enterprises is significantly slowing down. Therefore, before a unified bottom line is formed for production reduction in the upstream, the middle and downstream will still maintain a wait-and-see and price cutting strategy, and procurement will only be released in batches according to price steps to avoid stockpiling risks. In short, the sustained weakness in demand will continue to force individual factories to offer discounts for shipments, and the short-term stalemate in the market is difficult to change.
Overall, the off-season in July, coupled with the spread of bidding, is causing the silicone market to experience its deepest price dip of the year. The focus of the upstream and downstream game has shifted from "whether to stop the decline" to "how to stop the decline". However, the price game is gradually approaching the breakeven line, and the further downward space for individual factories may gradually narrow. The cost support effect will be manifested with a significant reduction in production. At that time, the substantial implementation of production reduction combined with downstream centralized replenishment is expected to jointly promote the stabilization and recovery of the organic silicon market.