2014 Silicone Monomer Market Shows Promise Overall

By Tian Guopeng, CNCIC China Silicon Material Information Research Center

Accelerated integration of
the silicone sector

China’s silicone monomer capacity grew very rapidly in recent years, from 935 kt/a in 2009 to 1.80 million t/a in 2011, doubling two years and leading to periodical surplus. The new silicone monomer unit in Dow Corning-Wacker’s Zhangjiagang Silicone Monomer Base has various advantages such as large production scale, advanced technology, and in particular, low cost, so its startup late in 2010 had a big impact on the country’s silicone monomer market. At the same time, the market was coping with other unfavorable factors such as slack domestic and international markets, disappointing sales and increasing costs of fuel, power and labor. Hence producers lowered operating rates, and the profit picture was dire. Some producers suffered huge losses. The entire silicone sector hit bottom in 2012. With fewer and bigger players in 2013, the operating rate of major monomer producers reached 90%, redundant construction was checked, a few enterprises emerged as industry leaders, producers started to reap profits again and the profitability of downstream enterprises was quite sound. It should be noted that Zhejiang Xinan Chemical Industrial Group Co., Ltd. announced in October 2013 that its wholly-owned subsidiary Zhenjiang Jiangnan Chemical Co., Ltd. acquired the silicone monomer unit of Jiangsu Hongda New Material Co., Ltd., accelerating the concentration of the sector. By the end of 2013 there were 14 silicone monomer producers in China, the total capacity was 2.165 million t/a and the actual output was around 1.42 million tons, an increase of 20.3% over the previous year. Utilization of silicone monomer units was around 66%, the highest in recent years. Table 1 shows the major silicone monomer producers in China in 2013.

Table 1   Major silicone monomer producers in China in 2013 (kt/a)

Producer    Region    Capacity
Dow Corning-Wacker Zhangjiagang Silicone Monomer Base    East China    400
Bluestar New Materials Co., Ltd. Jiangxi Xinghuo Silicone Plant    East China    200
Zhejiang Xinan Chemical Industrial Group Co., Ltd.     East China    275
Zhejiang Hengyecheng Silicone Co., Ltd.     East China    250
Shandong Dongyue Group Co., Ltd.     East China    200
Zhejiang Hoshine Silicone Industry Co., Ltd.     East China    180
Shandong Jinling Chemical Co., Ltd.     East China     150
Tangshan Sanyou Chemical Co., Ltd.     North China    100
Zhejiang Transit Fluorine Silicone Material Co., Ltd.     East China    80
Jiangsu Humboldt New Material Co., Ltd.     East China    100
Shanxi Sanjia Chemical New Material Co., Ltd.     North China    60
Luxi Chemical Group Co., Ltd.     East China    60
Hubei Xingrui Chemical Co., Ltd.     Central/South China    80
Sichuan Guifeng Silicone Material Co., Ltd.     Southwest China    30


In 2014, the silicone market in China tends to be promising overall. Producers’ inventories have been low, on the whole, and the supply is tense. In the first half of 2014, due to the recent unproductive period and the on-streaming of new capacity, the operating rates of monomer units were slightly higher overall than in the same period of last year. Weighing the cost of being shut down against the potential profit of starting up became one of major management issues of the year. Output is not expected to be much greater than last year – maybe 1.50 million tons more – but it will still reach a new high for recent years.

Consumption focused on silicone rubber

Silicone monomer is an important chemical raw material. It is mainly used in the production of silicone rubber, silicone oil and silicone resin. The consumption of silicone monomer in China was 708 kt (converted to 100% polysiloxane, the same below) in 2013, an increase of 100 kt and 16.4% over the previous year. Figure 1 shows the consumption structure of silicone monomer in China in 2013.
Silicone rubber: Silicone rubber is mainly used in the power and electronic sectors, and major products include computer keys, high-voltage insulators and electric wires/cables. It is also used in machinery, automobile and toy sectors. China’s consumption is much lower than that of developed countries.
The output of HTV (high-temperature vulcanized) silicone rubber in China was around 345 kt in 2013, consuming 238 kt of silicone monomer and accounting for 33% of the total.
RTV (room-temperature vulcanized) silicone rubber is mainly used in construction, mold manufacture, and other industries. China produced around 640 kt of RTV silicone rubber in 2013, consuming 316 kt of silicone monomer, 45% of the total.
Liquid silicone rubber is mainly used in computer keys, medical catheters, baby milk bottle nipples, cake molds, automobile components, hoses, sealing rings, miscellaneous parts, high-voltage molds, electronic products, toys, kitchen utensils, sports appliance handles and fittings, automobile water pipe connector parts, automobile door sealing rings and windshield wiper parts. China made around 17 kt of liquid silicone rubber in 2013, consuming 14 kt of silicone monomer, 2% of the total.
Silicone oil: Silicone oil has quite a lot of applications. It is mainly used in textiles, daily chemicals, de-foaming agents, lubricants and surface treatment agents. China made around 132 kt of silicone oil in 2013, consuming 134 kt of silicone monomer, 19% of the total.
Silicone resin: Silicone resin is a small factor in the silicone material market. Owing to its excellent features, such as thermal oxidative stability, electric insulation, weather resistance, water resistance, salt spray resistance, mildew resistance and biological compatibility, silicone resin products and modified silicone resin products are used extensively in national defense, electric products, leather, light industry products, rubbers, plastics, food and health supplies. China made around 20 kt of silicone resin in 2013, consuming 6 kt of silicone monomer, 1% of the total.

Slack prices

New capacity that started production at the end of 2010 affected the overall supply significantly in 2011, and China began to feel the effects of overcapacity. As mentioned earlier, since 2011, the market impact of the Dow Corning-Wacker plant in Zhangjiagang has been huge. Downturns in sales of houses and automobiles also slowed down the growth of demand for silicone monomer. The entire silicone sector was bogged down in 2011. After a small price increase to RMB23 000/t at the beginning of 2011, the price of DMC fell fast and hit bottom.
In 2012, competition in the silicone remained fierce. DMC prices languished in the first half of 2012 and even approached the all-time low of RMB16 000/t. Overall, silicone monomer producers suffered losses. After August, demand gradually picked up, producers that had suspended production restarted operation, and the overall operating rate exceeded 80% in the fourth quarter. The price of DMC also went up but was still on the low side, and most producers made no profit.
The annual pattern of slack and brisk seasons in the silicone market in 2013 was somewhat different from previous years. From June to August, the traditional slack season, the price of DMC increased from RMB16 600/t to the annual highest of RMB17 500/t.
The silicone market in China was slack in the first half of 2014 and the price of DMC floated, with some reduction. The price of DMC dropped below RMB16 000/t in April and later bottomed out at RMB15 600/t. With impacts from the macro economic situation, the silicone market is still slack. With rehabilitation revival of downstream demand and expanded application in new products, the surplus capacity for DMC will be gradually absorbed into the economy productively and the price of DMC will surely rise in the next few years.

Favorable prospects

Despite the present challenges such as overcapacity, an absence of drivers for reviving consumption and producers’ inadequate ability for product expansion, the silicone sector in China is marching forward, on the whole. The slackness in the market is only temporary. Overall, the silicone sector will still develop rapidly and enjoy bright prospects.