Silicone Fluid – China Becomes Net Importer with Steady Demand

By Peter Zong, Strategic Alliance of Green Silicon Industry Development Nationwide (SAGSI)

1. Capacity expands continually

Currently China has nearly 200 companies engaged in the production of silicone fluids and derivatives. Most of them, directly or indirectly, have matched facilities for further processing of silicone fluid. The quality of some product varieties is world-class. Overall, the industry has some troubles, like unstable quality, insufficient investment in R&D, poor formulating ability, etc.
In 2014, China’s silicone fluid production capacity and output were around 234 kt/a and 197.5 kt, respectively, with YoY growth of 5.4% and 19.0%. Capacity and output for 2006-2014 are shown in Figure 1. The enterprises are mainly located in eastern and southern China, near many silicone fluid consumers. China’s top silicone fluid makers are shown in Table 1.  
More than ten companies permanently withdrew from silicone fluid and emulsion production in China during the past two years. Among those, Zibo Huaxing Silicone Materials Co., Ltd., previously with 5 kt/a dimethicone fluid production capacity, is now engaged only in producing silicone elastomers; China Yushiro Chemical Industry Co., Ltd., which had been capable of producing 5.5 kt/a of dimethicone fluid emulsion, now produces no silicone containing products.
Yet, China has many projects under construction, as shown in Table 2.     

2. Consumption pattern

A. Textiles
The production growth of China’s textile industry slowed down in 2014, according to China’s National Bureau of Statistics. The total output of chemical fiber, yarn and cloth was 44.33 million tons, 38.99 million tons and 70.4 billion meters, respectively – representing YoY changes of +6.4%, +5.6% and -0.5% (only companies with annual sales exceeding RMB20 million are counted ).
With the slower growth and Chinese public and government paying more attention to environmental quality, health care and safety, the space left for domestic textile demand to grow is becoming smaller. On the other hand, with the fast development of the domestic economy, China has gradually lost much of its edge international competition with regard to manufacturing cost. To avoid trade friction and seek lower cost, some of China’s stronger textile companies have already constructed plants abroad. The downturn of 2014 is a key transition in China’s economic development. From 2015, Chinese economy enters an orbit of “New Normal”, which means single digit growth for the GDP. The annual growth in textile-sector demand for silicone fluid/emulsion is forecast to be around 0.8% in the next five years, far slower than the GDP. Consumption of silicone fluid in the textile industry is projected to be 67.7 kt in 2019, accounting for 27.5% of China’s total demand for silicone fluid.     
B. Household
Along with China’s overall economic slowdown, the growth of silicone fluid consumption in making household chemicals fell in 2014. Besides the impact of the slack economy, another impact came from the “silicone-free shampoo” headline. The United Kingdom submitted to the ECHA a proposal to restrict the use of octamethylcyclotetrasiloxane (D4) and decamethylcyclopentasiloxane (D5) in wash-off personal care products. The chemicals involved are raw materials of silicone fluids. Therefore, the growth of demand for silicone fluid in the household chemicals sector is projected to be slower now, but still faster than that in other consuming sectors. The average annual growth rate of demand for silicone fluid between 2015 and 2019 is expected to remain around 8%. The consumption will reach 65.3 kt in 2019, accounting for 26.5% of the total demand.
C. Mechanical
In the mechanical sector, silicone fluids are mainly used as release agent and lubricant in casting, discharging agent and cutting fluid in mechanical processing, brake fluid in automotive, working oil in clutch, etc. With the further development of economy and technologies, demand for mechanical use silicone fluids will grow up correspondingly. The growth of demand for silicone fluid in the mechanical sector is predicted to remain around 6.6% in the period of 2015-2019. China’s demand in the sector will reach 22.2 kt in 2019, 9% of the total.
D. Chemical
In the chemical sector, silicone fluid is mainly used as an additive in coatings, rubbers, feedstuffs, and in plasticizers and diluents for room-temperature-vulcanized silicone rubber. It is predicted that the average annual growth of demand for silicone fluid in the chemical sector will hover around 6.2% in 2015-2019, bringing annual consumption to 45 kt in 2019, accounting for 18.3% of the total.
E. Electronic and electrical
In the electronic and electrical sector silicone fluids are mainly used as an insulation cooling medium for transformers. Even though the prices of silicone fluid are several times higher than those of mineral oils, transformers using silicone fluids can be manufactured in a very simple process, and are more stable, both dynamically and thermally, and have better insulation performance, which can greatly reduce daily maintenance. Moreover, silicone fluids have a high flash point and a high ignition point, as well as overall fire resistance, because they can decompose into silicon dioxide, which is a flame retardant.      
It is predicted that the average annual growth of demand for silicone fluids in the electronic/electrical sector will be around 7.6% between 2015 and 2019. The consumption in this sector is expected to reach 21.5 kt in 2019, accounting for 8.7% of the total.   
F. Defoaming
Silicone defoaming agents can be divided into four big categories by product form – oils, solutions, emulsions and solids. Among these, emulsions have the widest range of applications and the biggest consumption. Silicone defoaming agents are widely used in cleaning out harmful foam during the production of rubber latex, textile sizing, biological pharmaceuticals, coatings, petrochemicals and paper, as well as in food fermentation, industrial cleaning, etc. It is predicted that the average annual growth of demand for silicone fluid in the defoaming sector will be around 5.3% between 2015 and 2019. Consumption in this sector is expected to reach 3.3 kt in 2019.   
G. Miscellaneous
Silicone fluids have found wide applications in other industries – for example, as a base agent in pharmaceutical excipients. Additionally, silicone fluids are widely used in making sealants, instruments, construction materials, foodstuffs and paper, as well as in printing, treating metal materials’ surfaces and polishing car components, leather goods and furniture. Pressured by oversupply and economic transition, sellers must find new applications for silicone fluids.  
It is expected that the “miscellaneous” demand for silicone fluid will grow 7.4% per year in 2015-2019, and will reach 21 kt in 2019, accounting for 8.5% of the total demand in that year.

Table 1   China’s major silicone fluid manufacturers & their capacities, 2014        (kt/a)

Company    Capacity    Fluid variety

Dow Corning (Zhangjiagang)  Silicone Co., Ltd.    35.0    Amino modified silicone fluid, dimethicone fluid, hydrogen-containing silicone fluid (SiH fluid), specialty silicone fluid
Bluestar Jiangxi Xinghuo Organic Silicone Plant    26.0    Dimethicone fluid, SiH fluid, amino modified silicone fluid, vinyl modified silicone fluid
Zhejiang Xin’an Chemical (Group) Co., Ltd.    11.5    Dimethicone fluid, SiH fluid, polyether modified silicone fluid, vinyl modified silicone fluid
Yichang Collin Silicon Material Co., Ltd.    10.0    Dimethicone fluid, amino modified silicone fluid
Guangzhou Tinci Materials Technology Co., Ltd.    9.0    Dimethicone fluid, specialty silicone fluid, volatile silicone fluid, polyether modified silicone fluid, phenyl silicone fluid, amino modified silicone fluid, transparent silicone fluid
Shandong Dayi Chemical Co., Ltd.    8.7    Dimethicone fluid, amino modified silicone fluid, polyether modified silicone fluid, specialty silicone fluid, vinyl modified silicone fluid, hydroxyl silicone fluid, SiH fluid, alkyl silicone fluid, etc.
Jiaxing Green Silicone Co., Ltd.    7.2    Dimethicone fluid, amino modified silicone fluid, hydroxyl silicone fluid
Guangzhou DX Chemical Co., Ltd.    7.0    Dimethicone fluid, amino modified silicone fluid, polyether modified silicone fluid
Zhejiang Sucon Silicone Co., Ltd.    6.2    Dimethicone fluid, SiH fluid, hydroxyl silicone fluid
Guangdong BioMax Si&F New Material Co., Ltd.    6.0    Dimethicone fluid, silicone fluid, alkyl silicone fluid, phenyl silicone fluid, compound silicone fluid, polyether modified silicone fluid, volatile silicone fluid
Others     107.4    
Total    234.0    



H. Consumption summary and forecast
In 2014, China consumed 191 kt of silicone fluid, a YoY growth of 5.2%, significantly lower than before. In recent years, domestic consumption of silicone fluid grew slowly year by year, mainly because of the slack economy and slowing growth in the textile industry. Since the end of 2014, the national government has loosened capital by policy, intending to spur the economy. Most economists expect that domestic demand and consumption will pick up overall in 2015 compared with 2014, with increasing growth. It is predicted that the average annual growth of demand for silicone fluid in China will be around 5.0% between 2015 and 2019, maintaining the moderate growth rate.   

3. Shift from net importer to net exporter

In 2014 China exported 47 kt of silicone fluid, a YoY growth of 65.9%; imported 40.5 kt of silicone fluid, a YoY decline of 7%; representing a net export of 6.5 kt, compared with a net import of 15.2 kt in 2013. By variety, the export volume of dimethicone fluid ranks first, and SiH comes next. The volumes of vinyl, amino and hydroxyl modified silicone fluid were all between 3.0 kt and 5.0 kt. The main destinations included Korea, India, the USA and the Netherlands, as shown in Figure 2.
By variety, the import volumes of dimethicone fluid and hydroxyl modified silicone fluid were largest. China imported silicone fluids mainly from the USA, Thailand, Germany, France, Japan, etc. Compared with 2013, the import amount from the USA, Thailand, Germany and Japan all declined to some degree, while those from France and Korea increased. The USA was the biggest source by volume in 2014, and Thailand ranked first in 2013.

Table 2    China’s main projects under construction or planned in 2015        (kt/a)

Company    Newly added
capacity    Variety     Progress


Yichang Collin Silicon Material Co., Ltd.    40.0    Dimethicone  fluid, etc.    Construction was started in September 2013
Jiangxi Pinhan Advanced Materials Co., Ltd.    17.0    SiH fluid, etc.    Sealing roof in June 2015
Jiangxi Yanxun Chemical Co., Ltd.     14.0    Epoxy silicone fluid, SiH fluid, SRS    Scheduled for startup in December 2015
Sichuan Kelixin New Materials Co., Ltd.     10.0    Specialty silicone fluid    Under construction
Tangshan Tongjia Technology Co., Ltd.    10.0    Amino modified silicone fluid    Under construction
Zhuhai Jiaying Silicone Materials Co., Ltd.     6.0    Silicone fluids    Construction was begun in December 2013
Zhejiang Keyuan Chemical Co., Ltd.    5.0    SiH fluid    Announced in October 2013
Jiangxi Baite Silicone New Materials Co., Ltd.    5.0    Emulsified silicone fluid    Scheduled for startup in December 2015
Sichuan Guifeng Silicone Materials Co., Ltd.    2.0    SiH fluid    Postponed
Shaoguan Xingkai Chemical New Materials Co., Ltd.    1.3    Amino modified silicone fluid    Under construction
Tangshan Sanyou Silicon Industry Co., Ltd.    1.2    SiH fluid    Under construction
Zaoyang Jiabao Silicon Auxiliaries Co., Ltd.    1.0    Silicone fluids    Announced in December 2013
Jiangxi Huantai Chemical Co., Ltd.     1.0    SiH fluid    Postponed



4. Prices have increased

The prices of silicone fluids in China have been stable in the past three years, and were hardly impacted by the sharp drop of crude oil prices in 2014. Because the silicone fluids and emulsions made by trans-nationals have reliable performance and excellent quality, they can be sold at higher prices.
In 2014 both Bluestar Jiangxi Xinghuo Organic Silicon Plant and Shanxi Sanjia New Chemical Materials Co., Ltd. put new silicone monomer plants on stream. In 2015 Tangshan Sanyou Silicon Industry Co., Ltd. and Hubei Xingfa Chemicals Group Co., Ltd. will add new silicone monomer capacity; Jiangxi Pinhan Advanced Materials Co., Ltd., Hubei Xingfa Chemicals Group Co., Ltd. and Tangshan Tongjia Technology Co., Ltd. will start up new silicone fluid plants. With all these added capacity, the overall operating rate of the domestic silicone fluid industry will certainly drop.
Based on adjustments of economic structure, prices of upstream products, demand for downstream products, and capacity status and expansion, the prices of silicone fluids in China will show two opposite trends: the prices of high end and specialty silicone fluids will remain strong, while the prices of bulk varieties and oversupplied varieties, such as dimethicone fluid and SiH fluid, will drop.  
Silicone fluids are made in many varieties, among which dimethicone fluid still holds the biggest market share. Since the beginning of 2015, prices of dimethicone fluid in China have hovered between RMB16 500/t and RMB17 000/t, leaving little room to drop further. It is predicted that in the remaining days of 2015, prices will fluctuate in this margin to seek the bottom, while makers of specialty fluids such as polyether-modified silicone fluid and fluorine-containing silicone fluid may enjoy rising prices.