Demand for DMC downstream products diverges, with slightly weaker transaction support [SMM Analysis]

SMM News on May 29: According to SMM, the mainstream quotation for domestic DMC this week was 11,500 yuan/mt, with the mainstream transaction center remaining stable for the time being. Monomer enterprises in east China quoted 11,400 yuan/mt this week, up 100 yuan/mt WoW. However, as the week progressed, the procurement enthusiasm of downstream enterprises in the market slightly weakened, and the market re-entered a calm phase. Downstream enterprises made purchases as needed based on end-use demand orders. The overall trading volume in the market slightly decreased WoW, but the overall performance remained moderate.

Figure: Price Trend of Silicone Products

Starting this week, the market transaction activity slightly declined. The procurement volume of downstream enterprises, such as those producing 107 silicone rubber and silicone oil, narrowed. In addition, the recent end-use demand for the aforementioned two products has been poor. For room temperature silicone rubber, due to the impact of hot weather, some outdoor construction activities have decreased, leading to a weakened demand for construction silicone rubber. In the textile and daily chemical sectors of silicone oil, demand has continued to remain low, providing weak support for DMC. For MVQ, although the previous cancellation of tariffs in the trade war provided some support for the demand in the high-temperature silicone rubber sector, recently, end-users have returned to rational procurement, making just-in-time procurement based on their own order volumes. Market transaction activity has slightly declined, but overall demand has still slightly increased compared to the previous period.

In terms of supply, monomer enterprises in north-west China fully resumed their operating plans this week, while monomer enterprises in Sichuan and Zhejiang entered maintenance cycles. In addition, after the Dragon Boat Festival, monomer enterprises in north China plan to enter maintenance. The overall operating monomer capacity in the market has remained basically unchanged, and the industry's operating rate is still below 60%.

In terms of profits, the recent significant decline in silicon metal prices, with some low-priced 421 silicon metal in east China priced below 9,000 yuan/mt, has led to a recovery in the profits of monomer enterprises compared to the previous period.