In recent years, the silicone industry has ushered in unprecedented development opportunities, with increasing production capacity and quietly changing market supply and demand patterns. In 2024, the production capacity of organic silicon monomers in China continued to grow, becoming the peak year of capacity expansion in the past five years. Among them, organic silicon DMC (dimethyl cyclic siloxane), as a key link in the industrial chain, has attracted much attention.
According to the latest data, the annual production capacity of organic silicon monomers is expected to reach 7.06 million tons in 2024, with a year-on-year increase of 24.08% and a growth rate 13.38 percentage points higher than last year. Behind this growth, there is not only a large amount of market investment attracted by price increases and high profits, but also the promotion of downstream demand growth and the integration extension of leading enterprises. Especially in the context of large-scale production becoming an important means of market competition, there are numerous plans for new construction of individual units, and the project construction period is usually around three years. The planned production capacity in the early stage is gradually put into operation in the past five years, which promotes the annual growth of individual production capacity.
However, with the rapid expansion of production capacity, the supply growth rate gradually exceeds the demand growth rate, and the organic silicon monomer gradually enters the stage of overcapacity. Taking organic silicon DMC as an example, in January 2025, the domestic production of organic silicon DMC is expected to increase by 6500 tons, leading to increased supply pressure and a risk of price decline. Especially as the delivery of pre-sale orders by enterprises approaches its end, the pressure on the supply side will further increase in the short term. The strong willingness of individual factories to accept orders and reduce inventory before the Spring Festival may lead to bidding for shipments by enterprises, further exacerbating the risk of price decline.
Nevertheless, the profitability of upstream and downstream products in the organic silicon industry chain has improved compared to last year. This is mainly due to the impact of supply and demand and cost changes. The prices of organic silicon industry chain products showed an overall trend of first rising and then falling during the year, with most average prices falling compared to last year. Especially the export volume of primary shaped polydimethylsiloxane has returned to growth, becoming an important tool for repairing the supply-demand relationship within the year, and also one of the main reasons for the slowdown in price fluctuations of products mainly based on DMC.
From a global market perspective, the production capacity of primary silicone products in China is continuously shifting to the domestic market, and foreign enterprises are maintaining an increasing demand for Chinese polydimethylsiloxane while expanding downstream products. At the same time, signs of global economic recovery are emerging, and the improvement of the external environment has promoted the growth of polysiloxane exports. In addition, the domestic stable foreign trade policies combined with the "the Belt and Road" and RCEP agreement promote the rapid growth of polysiloxane exports in these two markets. Under the combined effect of these factors, the cumulative export volume of primary shaped polydimethylsiloxane has reached 453600 tons, a year-on-year increase of 33.94%. It is expected that the year-on-year growth rate for the whole year will reach about 35%.
As an important part of the organic silicon industry chain, the market for gas-phase white carbon black is also showing a positive trend. In 2024, the production capacity of gas-phase white carbon black in China is expected to reach 213.30 thousand tons, an increase of 12.68% from the end of 2023. With the continuous development of downstream industries and the increasing application areas, the market demand for gas-phase white carbon black is expanding year by year, and the production capacity is gradually increasing. At the same time, in recent years, due to the rapid development of the organic silicon and polycrystalline silicon industries, the production of by-products such as methyl trichlorosilane and silicon tetrachloride has increased, and related enterprises have expanded downstream to develop more gas-phase white carbon black facilities. Under the combined effect of these factors, the profit margin of the gas-phase white carbon black industry has expanded year-on-year.
Looking ahead, new projects in the upstream and downstream of the organic silicon industry chain will continue to be released, and the capacity expansion speed of downstream products may gradually catch up with upstream. Organic silicon monomers may gradually emerge from the supply-demand imbalance pattern, and profitability may be improved. At the same time, with the increase of integrated large enterprises, some old equipment with small production capacity and reliance on external procurement of raw materials will gradually exit the market, further promoting the survival of the fittest and transformation and upgrading of the industry.
It is worth noting that the silicone industry is also facing some challenges in its rapid development process. On the one hand, intensified market competition has led to a decline in industry profits; On the other hand, the increase in environmental and safety requirements has also led to an increase in operating costs for enterprises. Therefore, enterprises need to continuously strengthen technological innovation and industrial upgrading, improve product quality and added value, in order to cope with market changes and challenges.
Overall, the silicone industry has achieved significant development results in recent years and will continue to maintain a growth trend in the future. However, in the face of fierce market competition and constantly changing market demands, enterprises need to constantly adjust and optimize their development strategies and market layouts to achieve sustainable development and long-term stable growth.