February 6th News: In January, the Caixin Service PMI was 51, a decrease of 1.2 percentage points from the previous month, the lowest since October 2024, but still maintaining expansion. The National Conference on High Quality Development is currently being held, empowering the organic silicon industry to develop in a new era of high-quality development. Leading enterprises in the industrial chain will accelerate their transformation and upgrading in terms of brand building, capacity reduction, and quality improvement. DMC has increased! Yesterday (February 5th), DMC offers were fully restored, and the average transaction price of mainstream DMC nationwide was 12850 yuan/ton, an increase of 100 yuan/ton compared to before the holiday. Specifically, the contract prices of top individual enterprises fluctuated weakly, with a slight increase due to the festive atmosphere. The spot market prices cautiously followed suit, with mainstream prices ranging from 12700 to 13300 yuan/ton. In terms of transactions, yesterday was the first working day after the holiday, and most downstream companies did not resume business. In terms of transactions, the vast majority of downstream major players have not started production, and market demand remains relatively low. Currently, there is no actual purchasing demand in the market. In the short term, the current market supply and demand are weak, with no actual large demand and mostly affected by emotional disturbances. It is expected that the spot price of organic silicon will fluctuate narrowly this week.
It is reported that a research institution recently released a report showing that the price of organosilicon has been hovering at the bottom of the cycle since 2023, and is expected to enter an upward trend in the future with the improvement of supply and demand. The overseas production capacity on the supply side has entered a period of stagnation, and the peak of domestic expansion has ended, with limited future supply increment; The demand side of silicone products has a wide range of terminal applications, with strong resilience in domestic demand and rapid growth in overseas demand.
The main viewpoints of the research institution are as follows:
Requirement: Organic silicon products have a wide range of terminal applications, strong resilience in domestic demand, and rapid growth in overseas demand
① The downstream products of organosilicon are mainly divided into five categories: room temperature adhesive, high-temperature adhesive, liquid adhesive, silicone oil, and silicone resin. The end applications include multiple fields such as electronics, power/new energy, construction, textiles, medical/personal care, industrial additives, and transportation. According to SAGSI statistics, the consumption of organic silicon in China has increased from 1.15 million tons in 2019 to 1.85 million tons in 2023, with an average annual compound growth rate of 12.7%. The reason for sustained growth is the substitution of traditional petroleum based materials and the expansion of new application areas. From the perspective of corresponding demand for segmented products, both room temperature adhesives and high-temperature adhesives are continuously driven by the new energy sector; Although the consumption base of liquid glue and silicone resin is relatively low and their downstream applications are scattered, the expansion of new applications can bring about an increase in demand, resulting in a relatively fast growth rate; Silicone oil is mainly used in traditional markets such as textiles and daily chemical products, so the demand growth rate is relatively slow. Based on product segmentation calculations, we expect the growth rate of domestic organic silicon consumption to remain at around 11% in the next three years. The consumption is expected to exceed 2 million tons in 2024 and reach 2.3 million tons in 2025.
② The demand for organic silicon exports in our country has grown significantly, and the export regions have been continuously enriched. According to statistics from the General Administration of Customs, the export volume of primary shaped polydimethylsiloxane in China will be 546000 tons in 2024, a year-on-year increase of 34.3%. The significant increase in the export of organosilicon is due to the sustained growth in overall demand for organosilicon driven by the global economic recovery; On the other hand, there is a trend of shifting the production capacity of primary organic silicon products to the domestic market, and foreign enterprises are maintaining an increasing demand for Chinese polydimethylsiloxane while expanding downstream products. From the perspective of the export destinations of organosilicon in China, with the continuous expansion of organosilicon applications in various global markets, the export regions of China have gradually become dispersed. Although South Korea, India, and the United States are still the three core export regions, their total export proportion in China has declined from 47% in 2015 to 38% in 2024. In the future, with the continuous expansion and optimization of organic silicon applications, it is expected that the export market of organic silicon in China will further expand.
Supply: Overseas production capacity has entered a period of stagnation, and the peak of domestic expansion has ended. The future supply increment is limited
① In 2023, the total global production capacity of organosilicon was 3.63 million tons, a year-on-year increase of 7.7%, of which the domestic organosilicon production capacity was 2.57 million tons, a year-on-year increase of 11.2%. In the past few years, the majority of the global increase in organic silicon production capacity has come from China; Overseas silicone enterprises are facing many restrictions such as environmental protection and cost, resulting in a reduction in production capacity.
② The newly added production capacity of China's organic silicon industry has been concentrated in 2024, and the future increment is limited. According to statistics from Baichuan Yingfu, 2024 is the peak period for the production of organic silicon, with a cumulative new production capacity of 605000 tons throughout the year. Only 100000 tons of new production capacity are planned to be put into operation in 2025. As the industry's expansion comes to an end and the newly added production capacity is gradually digested, organosilicon is expected to usher in a new round of business cycle.
Price: The price and price difference of organic silicon are both at the bottom of the cycle, and with the improvement of supply and demand, the price is expected to rise
Reviewing the historical price performance of organic silicon since 2016, it can be found that each round of price increases has benefited from the improvement of supply and demand. As of February 5, 2025, the market price of organic silicon DMC in East China is 12800 yuan/ton, still fluctuating at the bottom of the cycle. According to supply and demand analysis, it is estimated that the production capacity of China's organic silicon industry will reach 3.276 million tons by 2025, with a recovery rate of 84% and a production capacity of 2.75 million tons. Considering the growth of domestic and foreign demand, the industry can basically maintain a tight balance, and there may be a supply-demand gap in 2026. Against the backdrop of strong demand support in the silicone industry, in the long run, the newly added production capacity can be well digested, and the supply and demand are expected to continue to improve after the operating rate gradually increases, thereby driving the price bottom upward. Risk Warning: Downstream demand falls short of expectations, new production capacity exceeds expectations, and there are significant fluctuations in raw material prices.