SHANGHAI, Mar 31 (SMM) - The prices of DMC has reached a record high of 52,500 yuan/mt on October 8, 2021, and then fell rapidly thereafter. As of March 30, 2023, DMC spot prices fell to 15,600-16,500 yuan/mt, with an average price of 16,050 yuan/mt, setting a new low since June 2020.
Why does DMC Prices Continue to Drop?
According to SMM research, DMC prices have continued to decline since the first quarter of 2022, mainly due to oversupply. It is reported that due to the traditional peak season and enterprises maintenance in the first quarter of the year, the shortage of DMC supply was prominent. Therefore, in early February 2022, the prices of DMC reached the highest point.
However, in the second quarter, with the continuous ramp-up of new capacity, the supply has increased significantly. At the same time, the downstream real estate industry was underperformed, which dragged down the prices.
In 2023, the operating rates of DMC continue to increase. How will DMC price cuts affect the enterprises profits?
According to SMM data, the operating rates of DMC continued to rise to 82.27% in February 2023. It is reported that amid the traditional peak season in February and March, DMC companies were active in production, thereby driving the increase in operating rates.
However, the actual consumption from real estate industry in January and February has increased compared with December 2022, forcing down the operating rates of DMC companies to decline from 82.27% in February.
It is worth mentioning that, according to SMM previous research, in the week of March 15, the monomer factories in north-west, south-west, and central China reduced their production and carried out maintenance for 20-25 days.
In terms of profits, DMC companies that purchase raw materials from traders suffered losses of 1,700 yuan/mt amid falling DMC prices and rising costs. The profits of DMC companies with self-produced raw materials were better, but the profits were lower than 200 yuan/mt.
DMC Prices May Remain Weak before Terminal Demand Recovers
In the follow-up stage, SMM believes that the current market is not optimistic about the downstream demand in 2023. Coupled with the supply surplus, silicone prices are expected to be weak.
And it should be noted that many domestic DMC companies have recently lowered their prices, and the spot SMM DMC price dropped from 17,400 yuan/mt on March 1 to 16,050 yuan/mt. It is not ruled out the price cut may implies the start of the price war.
