Silicone Upstream-Downstream Tug-of-War Stalemate, DMC Transaction Center Shifts Down Again [SMM Silicone Weekly Review]

SMM, June 18 —

Cost side: On June 18, the average price of east China #421 silicon (used in silicone) stood at 9,600 yuan/mt, flat WoW, while east China #421 silicon averaged 9,400 yuan/mt, also flat WoW. Spot silicon metal prices were largely stable, with futures prices under pressure and edging lower in a narrow range, and the price range narrowed. Methyl chloride prices held stable WoW, with the market average price around 2,800 yuan/mt, and integrated production costs for silicone monomer enterprises remained stable WoW.

DMC: This week, the supply-demand stalemate in China's silicone DMC market intensified, with prices once again appearing stable on the surface but declining quietly. Mainstream transactions ranged from 14,000 to 14,300 yuan/mt, averaging 14,150 yuan/mt. Demand side, the market was in the traditional off-season, with weak end-user shipments, high finished product inventories in the midstream and downstream, and slow raw material consumption. Coupled with the Dragon Boat Festival holiday and the sentiment of rushing to buy amid continuous price rise and holding back amid price downturn, enterprises adopted a cautious wait-and-see approach in procurement, with deals limited to small volumes driven by rigid demand. Downward pressure on prices was strong, upstream shipments were under pressure, and some producers offered volume discounts, widening the bargaining range. Supply side, under the oversight of emission reduction policies in the silicone industry, multiple monomer enterprises started to shut down or reduce loads successively since last week, causing operating rates in the industry to pull back. Some monomer enterprises will also undergo annual full shutdowns for maintenance later, keeping expectations of tighter supply in place. Overall, the drag from demand significantly outweighs the support from supply currently. DMC prices are expected to remain in the doldrums in the short term, and if there is no restocking action downstream, there is a risk of further price declines.

Silicone oil: This week, the price of regular viscosity dimethyl silicone oil fell, with transaction prices ranging from 15,700 to 16,500 yuan/mt and a market average of 16,100 yuan/mt, down 150 yuan/mt WoW. End-user orders remained persistently weak, and producers faced obstacles in shipments. Some small and medium silicone oil enterprises suspended production or reduced loads, mainly to consume inventories. Integrated monomer enterprises, with their significant cost advantages, quoted more competitive prices, further concentrating market orders. Overall, with weakening upstream DMC prices and sluggish end-use demand, both cost and demand support were insufficient. Silicone oil prices are expected to remain weak and consolidate in the short term.

107 silicone rubber: This week, the price of regular viscosity 107 silicone rubber held stable, with transactions ranging from 14,300 to 14,500 yuan/mt and an average of 14,400 yuan/mt, flat WoW, as major transaction prices leaned toward the lower end of the range. Under the influence of easing raw material DMC prices, downstream silicone sealant enterprises were further prompted to push for lower prices, fostering a cautious sentiment. However, 107 rubber costs had already inverted, leaving enterprises with limited room for price cuts. Sellers and buyers were locked in a stalemate, keeping prices stable. In the short term, with both cost support and weak demand, prices will remain mainly stable, but if DMC continues to weaken, prices may face a risk of softening after cost losses ease.

MVQ: This week, MVQ prices were stable, with transactions ranging from 15,000 to 15,400 yuan/mt and an average of 15,200 yuan/mt, flat WoW. The supply side is mainly driven by shipments from top-tier players. Affected by the industry's emission reduction policies, overall operating rates will be lowered, and supply will show a contractionary trend; meanwhile, some other producers mostly produce to order, maintaining a balance between production and sales. On the demand side, affected by weak end-use demand, downstream only maintains procurement of small orders for essential needs. Some enterprises have sufficient raw material inventories, and their procurement enthusiasm is also low.