Amid cost support and supply contraction, the silicone market stabilized with a strengthening trend [SMM Silicone Weekly Review]

SMM, August 27:

Cost side, on August 27, the average price of east China #421 silicon (used in silicone) was 9,600 yuan/mt, up 50 WoW, and the average price of east China #421 silicon was 9,550 yuan/mt, up 50 WoW. This week, silicon metal prices were firm, with silicon suppliers holding offers firm and downstream mainly making just-in-time procurement. This week, methyl chloride prices rose, with the market average price around 3,500 yuan/mt, and comprehensive production costs for silicone monomer enterprises rose WoW.

DMC: This week, China's silicone DMC price center continued to move up, with quotation range at 13,500-14,000 yuan/mt and transaction range at 13,300-13,500 yuan/mt. Raw material side, silicon metal and methyl chloride prices edged up, providing basic support for DMC prices, coupled with gradual digestion of low-priced inventory in the market, bullish sentiment was strong, and silicone monomer enterprises raised their offers. Meanwhile, some monomer plants underwent maintenance and output cuts this week, showing a clear intention to cut production and hold prices firm. Currently, monomer plants face relatively small inventory pressure, and most monomer plants have orders scheduled through mid-to-late September. Overall, China's DMC price is expected to fluctuat around 13,500-14,000 yuan/mt in the near term.

Silicone oil: This week, the market quotation range for conventional viscosity dimethyl silicone oil was 15,000-15,500 yuan/mt, with an average price of 15,250 yuan/mt, up WoW. Cost side, raw material DMC prices continued to rise, providing cost support for silicone oil, and silicone oil enterprises currently have sufficient orders, strengthening their willingness to hold prices firm. Dem and side, downstream clients continued to make just-in-time procurement.

107 silicone rubber: This week, the market price of conventional viscosity 107 silicone rubber showed an uptrend with prices holding firm, in a range of 13,700-14,200 yuan/mt. Affected by the rise in raw material DMC prices and ample orders, enterprises had a strong willingness to hold prices firm. Dem and side, downstream clients maintained a stable procurement pace, with cautious willingness to chase rising prices, while just-in-time procurement remained in tow.

MVQ: This week, the MVQ market quotation range was 14,500-14,800 yuan/mt. Driven by rising DMC prices and the market sentiment of holding prices firm, producers had a strong willingness to hold prices firm. Some monomer plants adjusted their MVQ shipments, adopting a ‘high-lw matching’ bundling strategy. Dem and side, on one hand, rubber compounders proactively controlled order taking and slowed raw material consumption to avoid chasing high prices; on the other hand, they continued just-in-time procurement of spot MVQ.

Overall, the silicone market is currently supported by cost side fundamentals and ongoing supply contraction, and prices are expected to stabilize with a firm bias in the near term, with the center edging up slightly. However, downstream's ability to digest high-priced raw materials is limited, and if subsequent demand follow-through falls short of expectations, the upside room will be constrained. Going forward, attention should be paid to monomer plants' operating dynamics and actual downstream demand during the peak season.