Overcapacity reduction drives the reversal of the supply and demand pattern of organic silicon and prices continue to rise

> After nearly a decade of bear market, the global silicone industry has regained its vitality. As of last week, the mainstream transaction price in the organic silicon market was 19,800-20,300 yuan/ton, a sharp increase of 8.1% compared with 18,500 yuan/ton at the beginning of last month. On March 6, the price of organic silicon continued to rise by 1,000 yuan to 21,300 yuan/ton.

Industry insiders believe that the price increase of organic silicon is firstly due to the completion of overcapacity reduction in the industry, and secondly, the warming of downstream demand. In addition, factors such as rising raw material prices and environmental protection production restrictions will provide support for the price of organic silicon in the future.

As a major country in the silicon industry, my country’s organic silicon monomer production accounts for about 70% of the world’s production. Due to sluggish demand and severe overcapacity, the domestic silicone industry’s production capacity basically stopped expanding after 2014. Starting from 2015, it entered the production capacity clearance phase, and last year the supply and demand pattern reversed.

According to comprehensive statistics from Industrial Securities, as of the end of 2016, the actual output of organic silicon in the country was 1.7 million tons, and the industry’s operating rate increased by about 10 percentage points year-on-year. At the same time, industry concentration has also increased, with the top five companies’ production capacity share rising to 65%. Currently, my country’s organic silicon monomer production capacity is 2.855 million tons, and the effective production capacity is 2.3 million tons.

Old production capacity has been withdrawn, but new production capacity lacks replenishment. Last year, except for Sichuan Silicon Peak’s 100,000-ton technical transformation and the start of trial production, there was no new production capacity in the industry.

Tianfeng Securities judged that environmental protection will continue to maintain a high-pressure situation in 2017. The current industry operating rate is at a relatively high level of 76%, and it will be difficult for subsequent industries to increase the operating rate.

In addition to changes on the supply side, there is also warmth in downstream consumption.

After entering March, the downstream market of organic silicon has gradually warmed up, and purchases have increased. Currently, the mainstream transaction price of 107 rubber market is around 20,500-21,000 yuan/ton, a month-on-month increase of 5.12%; the mainstream transaction price of raw rubber increased by 7.5% month-on-month.

The most eye-catching performance last week was the imported silicone oil market. Due to the maintenance of Dow Corning equipment in March and the reduction of equipment in February, the market price continued to rise. Many agents even quoted more than 23,000 yuan/ton. high price.

With the recovery of global real estate, the demand for silicone downstream including silicone rubber (room temperature glue and high temperature glue), silicone oil, etc. is growing rapidly. At present, the effective domestic production capacity of silicone DMC is 1.3 million tons, and the consumption and export volume are 1.25 million tons. Considering that domestic large-scale equipment will undergo intensive maintenance from March to June, the industry expects that silicone prices will continue to rise rapidly.

According to Tianfeng Securities’ prediction, the industry’s annual demand growth rate will be 4% in the future. 90% of my country’s silicone products are digested through the domestic market, mainly in the construction, automobile and electronic industries. The latter two are expected to maintain medium-to-low growth.

From the perspective of the short-term market, Baichuan Information believes that the current equipment start-up of domestic enterprises has improved, but the orders owed by factories in the early stage are still being issued, and the market supply will continue to be tight. In the medium to long term, as the operating load increases significantly, price increases may be limited.