Silicone production continues to increase. The entry of rigid demand has limited the inventory increase during the off-season [SMM analysis]

SMM News on July 4: According to SMM statistics, domestic silicone DMC production in June increased by 13.75% MoM from May and decreased by 1.60% YoY. In June, the operating load of most domestic silicone monomer enterprises increased. After continuous production cuts and shutdowns over several months, the number of silicone plants available for maintenance decreased recently. Therefore, the overall increase in operating capacity led to a rise in silicone production. Regarding subsequent production, although the operating load of some monomer enterprises in China will decrease in July, the overall impact will be relatively limited. It is estimated that silicone production in July will increase by 1.53% MoM from June.

Figure: Trend of Silicone DMC Production

Review of the June market: During the month, leading enterprises in Sichuan and Zhejiang regions continued to conduct maintenance on monomer plants. Originally scheduled to resume production in mid-June, the plant restart plans have been postponed. Additionally, maintenance at monomer enterprises in Inner Mongolia resumed in mid-to-late June, while the operating load of some plants at monomer enterprises in Shandong decreased slightly, as did the load of monomer plants in Hebei. The number of plants under maintenance in the market decreased compared to the previous period. Meanwhile, some enterprises with slightly lower operating loads in June saw profit improvements due to the decline in silicon metal prices on the cost side. Additionally, prolonged plant maintenance is detrimental to production. Therefore, under the combined impact, although the change in in-production capacity in China was relatively small, the increase in capacity load led to a rapid rise in overall silicone production in June. However, amid the increase in production, some downstream enterprises entered the market with rigid demand in mid-June, and transactions recovered somewhat, enabling silicone monomer enterprises to still manage inventory pressure. Thus, it is expected that enterprises' production willingness will remain high.

Figure: Trend of Silicone Polysiloxane Inventory

Production schedule expectations for July: Domestic enterprises in Shandong are expected to complete partial maintenance of their plants, and capacity load will increase. After maintenance, the load of monomer enterprises in Inner Mongolia will also reach full capacity. Domestic production expectations are strengthening, and it is estimated that domestic DMC production in July will increase by approximately 10,000 mt from June.