At present, the silicone market is experiencing a severe price fluctuation led by leading factories, and the overall market is in deep chaos. Yesterday, leading factories staged a combination of "canceling orders - a major drop across the board" operations, causing prices of 107 rubber, raw rubber, and silicone oil to plummet simultaneously. As of the time of writing, the prices of leading raw rubber were 11500 yuan/ton, 107 rubber was quoted at 11000 yuan/ton, and methyl silicone oil was quoted at 12200 yuan/ton. This price level has completely penetrated the psychological defense line of downstream operators.
From the actual transaction situation, it can be seen that the leading factory's "low price big reward" this round is not an unlimited increase in volume. According to the latest market news, it adopts a limited order taking strategy to prioritize long-term cooperative customers, and evaluates the low price allocation quota based on the customer's annual order volume. Therefore, although midstream and downstream enterprises rushed to the leading online platforms to grab orders yesterday, the actual trading volume was strictly controlled.
At present, other individual factories have not followed up on this price reduction action and are closely monitoring the volume increase pace of leading factories. The focus of market competition is that if leading factories have strict control over quantity and limited low-priced supply in the market, other individual factories may temporarily stabilize their positions; On the contrary, if leading factories increase their output significantly, some companies may be forced to follow suit in order to stabilize their shipment volume, which may lead to the collapse of the entire industry's price system. In short, the current market quotation system is extremely chaotic, with all parties in a game state of fighting on their own, and the short-term direction is full of uncertainty.
On the demand side: Market sentiment was quickly ignited by the price cuts of leading factories. Although midstream and downstream enterprises concentrated on their online platforms to buy at the bottom and stock up, they need to be aware that this buying frenzy is more due to speculative hoarding after prices fell to psychological expectations, rather than the recovery of actual demand at the end. Currently in the off-season for construction, due to the tight funding chain of real estate companies and extreme weather conditions such as high temperatures, the demand in the construction sector, which accounts for the majority of downstream consumption, remains weak. The operating rate of silicone adhesive companies remains low, with rigid procurement being the main focus. And the carrying capacity of the terminal market remains questionable, putting the sustainability of this speculative demand to the test.
Overall, the current market price has approached or even fallen below the industry's common cash cost line, and the space for further decline is relatively limited. However, whether it can truly stop the decline and rebound still depends on the substantial improvement of terminal demand, and bottom fishing behavior is only a temporary relief.  
Industrial silicon: On the supply side, during the wet season, the southwest electricity price is declining, coupled with stable production by large factories in Xinjiang, continuous increase in supply, and high social inventory; On the demand side, there is a high inventory of polycrystalline silicon and organic silicon monomer factories are operating at a reduced load, resulting in light procurement. The pattern of strong supply and weak demand in the industrial silicon market continues. In addition, the energy consumption national standard promotion meeting on July 20th released a signal of clearing medium and long-term production capacity, which has driven the recent rebound in futures sentiment. However, the policy effect is difficult to achieve in the short term, and the fundamentals remain weak.
As of July 23rd, the closing price of the main futures contract Si2609 is 8295 yuan/ton; The spot price of 421 # silicon metal has dropped slightly to 9200-9700 yuan/ton. It is expected that industrial silicon prices will remain low and fluctuate in the short term, with limited space above and cost support below. We need to pay attention to the pace of destocking and policy changes in the future.