It will take time for silicone to get out of the trough

Up to now, the organic silicon market has been falling for 3 months, and the price has fallen below 14,000 yuan (ton price, the same below). The price of organic silicon in an enterprise in Shandong was once as low as 13,700 yuan, which was at a five-year low. Analysts in the industry believe that it will take time for the organic silicon market to get out of the trough due to the difficulty in alleviating the contradiction between supply and demand in the market.

There is a lot of resistance to the rebound

Liu Hao, an analyst at Longzhong Information, said that after the continuous decline in the early stage, organic silicon has been polished at the bottom near 14,000 yuan for nearly a month.

The increase in supply is one of the important factors for the continuous decline of the silicone market. Looking back at the market in the first quarter, the third phase of Xinjiang Hesheng Shanshan was mass-produced with an annual output of 200,000 tons, and the Stellar Technology device was started. The market supply has increased significantly, the contradiction between supply and demand has continued to expand, and the price has dropped sharply. The overall average price is about 16,600 yuan, a decrease of about 57.24% from the first quarter of 2023, and a decrease of about 48.49% from the fourth quarter of 2023.

Since then, manufacturers have increased their consumption for their own use by reducing load, rolling in at low prices, or extending downstream; the orders of downstream large and medium-sized enterprises are relatively stable, but the growth rate is lower than expected; while the operating rate of small enterprises has dropped significantly, and their attitudes are pessimistic. Negative entry into the market has led to a lackluster trading atmosphere in the market.

From the perspective of operating rate, since the end of June, the operating rate of 13 domestic silicone DMC sample enterprises is 55.67%, which is slightly lower than before. At present, the first phase of Dongyue plant, Hengyecheng plant, Xin'an Zhenjiang plant and Jiangxi Xinghuo plant are still shutting down, the star plant is recovering one after another, and the rest of the plants are operating normally.

Looking at the market outlook, the factories that have postponed the start of work before will resume work one after another in order to maintain core customers, hold market share and prevent parking to cause greater losses, and the supply side is still expected to increase. Manufacturers such as Xinghuo, Xingxing, and Hengyecheng are expected to start operations in the near future, and the operating rate of silicones may rise to 71.69%. The increase in supply makes the silicone market have no basis for a sharp rebound.

Insufficient cost support

Analysts at Jinlianchuang said that the price of raw materials has fallen sharply. Although it is difficult to support the strengthening of the silicone market, it will reduce the pressure on enterprises in terms of cost. Looking back at the organic silicon market this year, the price of raw material silicon metal fell by 800-1,000 yuan in April, and the price of monochloromethane in Shandong fell by 550 yuan within the month. At this time, the profits of organic silicon factories are mostly upside down. In May, the price of raw material silicon metal continued to fall, falling by 1,300-2,000 yuan within the month; the price of monochloromethane in Shandong fluctuated in a range, with an increase of 550 yuan within the month, and the transaction price was mostly concentrated at 2,450 yuan.

The price of metal silicon 421# on the raw material side is still falling, and the current mainstream transaction price in the market is 13,700 to 13,950 yuan. The price of monochloromethane has stabilized since June, and the current transaction price in Shandong is 2,500 yuan.

In June, as the pressure on the cost side continues to ease, the profitability of silicones has improved, and the current profit margin is close to 450 yuan.

Looking at the future market, due to the weak demand in the early stage of raw material silicon metal 421#, the accumulation of inventory has led to a decrease in the furnace opening rate and tightened supply. The price will rise in the short term. With a wave of consumption upsurge, market transactions will be active, but this will have limited boost to the organic silicon market. Another raw material, monochloromethane, is stable and slow to move. On the whole, it is difficult for the raw material side of organic silicon to support the market.

Weak demand support

Wang Chunming, general manager of Shandong Ruiyang Chemical Co., Ltd., said that due to the continued downturn in the housing and auto markets of the organic silicon terminal market, there is still no improvement. Superimposed on the upstream raw material end, the expansion of production is sufficient, while the demand for downstream silicone rubber and other demand expansion is not as good as expected, so that the silicone rubber market continues to operate at a low level.

Wang Chunming introduced that judging from the various exhibitions and conferences of terminal products in the first half of the year, neither the real estate industry nor the new energy industry has any good news.

Currently, Zhejiang Zhongtian raw rubber plant Hengyecheng rubber plant is in a shutdown state, and silicone rubber manufacturers are accepting orders at a high price, and the price is stable. For 107 rubber and raw rubber products, after a large factory made a profit to discharge the inventory, some customers were stimulated to enter the market to grab orders, reducing the inventory to a controllable range, while the rest of the manufacturers were limited by their own cost considerations, which caused some wait-and-see customers to become more cautious , to postpone the order.

Market participants said that leading manufacturers play a leading role in the market with absolute cost, price and quality advantages, which also dampens the confidence of other manufacturers to follow suit and further accelerates the market reshuffle. However, the downstream demand continued to be weak, the orders received by factories were mediocre, the downstream industry did not see any positive support in the market outlook, and the industry players were pessimistic and cautious in entering the market.

Looking at the market outlook, the price of silicone rubber products is sluggish, and the market may be stalemate. In the early stage, in order to reduce losses, manufacturers used silicone DMC to make silicone rubber products for their own use. Now the weak terminal demand and the squeeze of market share by leading manufacturers have forced some silicone rubber manufacturers to withdraw from the market and wait and see. The market trading atmosphere has become more deserted. The rubber market will continue to operate weakly and steadily, and it will be difficult to support the upstream organic silicon. (Zhao Shuling)