Expectations for Supply Recovery Strengthen, While Destocking Pressure Remains High for Monomer Enterprises [[SMM Silicone Weekly Review]]

SMM May 8:

Costs: This week, the average price of #421 silicon (used in silicone) in east China was 11,000 yuan/mt, maintaining stability compared to last week. The average price of #421 silicon in east China was 10,050 yuan/mt, a decrease of 250 yuan/mt WoW. Domestic silicon metal producers slightly lowered their quotes this week. With the weakening operating rates of both silicon metal and polysilicon producers, coupled with the high inventory pressure on silicon metal producers, #421 silicon prices were further reduced to facilitate sales. The price of monochlorosilane remained stable this week, with transaction prices in east China at 2,100 yuan/mt. The comprehensive costs decreased WoW, leading to a slight increase in the profits of monomer enterprises.

DMC: This week, domestic DMC quotes ranged from 11,300 to 11,800 yuan/mt, with the average price remaining unchanged WoW. This week, the opening DMC quote on the online mall of a monomer enterprise in Shandong was 11,500 yuan/mt. The DMC quote of a leading enterprise was 14,800 yuan/mt, temporarily unchanged. Other domestic monomer enterprises quoted DMC at 11,500-11,600 yuan/mt this week. The domestic DMC market saw a weakening in transaction activity this week. Following the stockpiling period during the Labour Day holiday, downstream enterprises began to reduce their procurement volumes, primarily engaging in just-in-time procurement. Additionally, with the slight recovery in the operating rates of monomer enterprises in the near term, the implicit supply pressure in the market increased. Monomer enterprises were in a panic to destock. Against the backdrop of weakening transactions, it is expected that local DMC transaction prices will slightly loosen, but the main tone will still oscillate around 11,500 yuan/mt.

Silicone Oil: The dimethyl silicone oil market continued to exhibit a weak and stable stalemate this week. In terms of prices, market quotes ranged from 14,000 to 14,500 yuan/mt. However, the market is currently in a buyer's market, with buyers exerting significant downward pressure on prices. Therefore, there is still room for negotiation in actual transactions. On the demand side, the bargaining cycle for downstream enterprises has generally prolonged, with procurement orders for textile auxiliaries, daily chemicals, etc., still in a state of contraction. Single procurement volumes are mainly small, resulting in low overall procurement enthusiasm and low market liquidity. On the supply side, affected by the continuous weakness in downstream demand, some producers have recently reduced their operating rates and supply through production cuts, suspensions, and conversion plans. However, the pre-holiday dumping at low prices compressed profit margins, placing significant pressure on producers. In the short term, with the DMC price on the cost side temporarily stable, the market will remain in a weak and stable state, neither falling nor rising significantly.

107 Silicone Rubber: The 107 silicone rubber market in silicone sector operated steadily this week. In terms of prices, market quotes ranged from 12,000 to 12,800 yuan/mt, remaining relatively stable. In terms of inventory, although just-in-time restocking before the holiday transferred some inventory to the downstream, the total industry inventory did not substantially improve, resulting in continued insufficient market confidence. On the demand side, pre-holiday buying the dip by downstream enterprises briefly stimulated transactions, but the restocking volume was small, mainly for just-in-time needs, failing to trigger real demand growth. Additionally, the continuous sluggishness in end-use demand from sectors such as construction and PV has prolonged the consumption cycle of downstream raw materials, leading to a situation where demand is interrupted after periodic restocking. However, supported by costs, the overall market price remained stable after the holiday.