Fundamentals of 107 silicone rubber are weak, market transactions are rational [SMM Analysis]

Since the adjustment of China-US tariff policies on May 12, the end-use demand for some silicone products has slightly rebounded, driving up the heat in the industry chain. The number of inquiries for products such as MVQ and DMC has increased, and transactions have also seen a slight uptick. The number of inquiries in the 107 silicone rubber market has also risen, but actual transactions remain rational. As of May 23, the market price of 107 silicone rubber ranged from 11,800 to 12,700 yuan/mt, with no significant price changes during the week. This is mainly because the overall substantive end-use demand in the market has not improved, and the industry is still facing high inventory and weak demand.

From the perspective of market feedback, the export dependency of 107 silicone rubber is low, and the benefits of the China-US tariff adjustments are limited. This is primarily because the proportion of downstream end-use products of 107 silicone rubber directly exported to the US is relatively small. Therefore, despite the tariff policy adjustments, the demand boost for 107 silicone rubber has been minimal. For 107 silicone rubber, its main demand comes from the domestic market. However, due to the continued sluggishness of key domestic demand sectors such as construction and PV, for instance, in the construction industry, affected by factors such as the ongoing adjustment of the real estate market and the current off-season, downstream enterprises lack market confidence. With weak demand, they are relatively cautious in purchasing 107 silicone rubber. In the PV industry, the number of module orders in May has decreased, and the prices of newly signed orders in the first half of the month have been declining. Most enterprises have production cut plans, so their purchases of 107 silicone rubber are only maintained at a just-in-time level.

From the perspective of market fundamentals, the overall supply of 107 silicone rubber currently remains loose. In terms of demand, the raw material consumption cycle of downstream enterprises has lengthened, and there has been no significant change in end-use demand. Therefore, their purchasing demand is relatively cautious, and transactions are rational. In terms of supply, with the resumption of production from previously overhauled capacities, the industry's operating rate has gradually increased, putting certain pressure on producers' inventories. However, the price of the raw material cost DMC has remained stable, providing some support for prices.

Overall, despite the recent increase in the heat of the silicone market, for 107 silicone rubber, it is more of a sentiment-driven boost, and the actual demand has not seen substantive improvement. Recently, prices have remained stable due to back-and-forth negotiations between upstream and downstream. However, looking ahead, the overall market is still facing oversupply, and there is still downward pressure on the market price of 107 silicone rubber.