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Accelerated expansion of silicone production capacity, the world is facing a phased mismatch of supply and demand

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1. All new organic silicon production capacity in the world comes from China, and China will still have more aggressive expansion plans in the future.


In 2020, the global organic silicon production capacity will be about 3.001 million tons/year (in terms of siloxane, the same below), an increase of 155,000 tons/year year-on-year, and all the new capacity will be concentrated in China, namely Xin'an Chemical Zhenjiang’s new capacity of 75,000 tons Tons/year, Hubei Xingfa’s organic silicon monomer technological transformation project will increase production capacity by 80,000 tons/year.


China's organic silicon production capacity expansion plans are very aggressive in the future. If all the above projects are successfully completed and put into production, the global organic silicon production capacity will increase by more than 60% to 4.915 million tons/year, while China’s organic silicon production capacity will increase by nearly 130% to 3.399 million tons/year. By then, China’s organic silicon production capacity will increase by 50%. % Increased to nearly 70%. However, there is a big uncertainty as to whether the newly planned projects can be completed and put into production, according to Sinochem? According to the consultation, the production capacity of the above-mentioned projects can be completed and put into operation about 650,000 tons/year. It is estimated that in 2023, the global organic silicon production capacity will reach 3.651 million tons/year, and China's organic silicon production capacity will reach 2.289 million tons/year.


2. The growth rate of organic silicon demand will slow down due to the impact of the epidemic in 2020, and global demand will continue to grow rapidly in the future.


Silicone is widely used in almost all industrial fields and high-tech fields such as construction, textiles, electronics, transportation, aerospace, new energy, medical, daily chemicals and personal care. It is an indispensable material in modern industry and daily life , Therefore, the growth of organic silicon demand and GDP growth (economic growth) are highly correlated. According to historical data analysis, the growth rate of global organic silicon demand is generally 2% to 3% higher than the GDP growth rate over the same period.


It is expected that the global organic silicon demand will continue to grow rapidly in the future, and the main driving factors include: global economic recovery. With the expansion of the scope of new crown vaccination, the impact of the epidemic on the world will gradually fade in the future, and a greater recovery of the global economy will be a high probability event, which will drive the growth of silicone demand.


3. In the future, the growth of global organic silicon demand will still be driven by China.


China is a major producer and consumer of organic silicon in the world. In 2020, China's organic silicon consumption will be approximately 1.15 million tons. In the future, with the gradual advancement of China’s economic transformation and the steady implementation of the “Made in China 2025” and “One Belt, One Road” national strategy, Sinochem? The consultation predicts that the consumption of organic silicon will continue to grow. It is estimated that the consumption will reach 1.4 million tons in 2023, and the average annual growth rate will be about 6.7% from 2020 to 2023, which will be higher than the GDP growth rate in the same period.


The future growth of demand in the Asia-Pacific region will be the main driving force for the growth of global silicone demand, and China will have the highest growth rate. Specifically, by 2023, the annual compound growth rate of organic silicon demand in major countries and regions in the world will be 6.7% in China, 2.4% in the United States, 0.9% in Western Europe, 1.1% in Japan, 5.1% in other Asia-Pacific regions, 2.6% in Central and Eastern Europe, Middle East and Africa 3.8%, Central and South America 2.0%. In the future, China will still be the main driving force for the growth of organic silicon demand.


4. The supply and demand pattern of the silicone industry is difficult to reverse in the short term, and the future will face a phased mismatch of supply and demand.


According to the expectations of the future supply and demand pattern, Sinochem? Consulting and judging that the domestic silicone market will present the following three characteristics in the future:


The mismatch of supply and demand will still be maintained at home and abroad. In the future, the demand for organic silicon in developed countries and regions will continue to grow slowly, and the demand for organic silicon in emerging markets and developing economies will increase with the rapid economic development of their economies. However, the production capacity of organic silicon monomers in developed countries and regions will no longer continue to expand due to environmental protection factors, and the production of organic silicon monomers in underdeveloped regions has not yet been produced due to technical factors. In the future, the increase in organic silicon production capacity will be concentrated in China. Match. It is expected that overseas markets, especially the markets of countries along the route under the “One Belt and One Road” initiative, will be an important way to resolve the overcapacity of silicone monomers.


Prices will remain weak for a long time, and emergencies may bring opportunities to rise. In the fourth quarter of 2020, the price of domestic organic silicon and downstream products rose rapidly: In October, as domestic demand recovered and global orders were concentrated in China, the price of DMC gradually rebounded to about 20,000 yuan/ton; and on November 9 in Zhejiang The fire accident in the sky opened the door for DMC to "skyrocket"; domestic supply reduction combined with strong domestic and foreign demand, short supply caused DMC prices to rise rapidly to 33,000 yuan/ton; Zhangjiagang Dow had a leakage accident in early December and stopped production in early December Prices remain high. However, the downstream is more resistant to high prices, and purchases are gradually cooling down. The current DMC price has fallen sharply to the level of 20,000 yuan/ton.


In the short term, organic silicon at home and abroad will still maintain relatively strong demand during the recovery phase of the global economy. However, in the long run, the supply and demand pattern determines that the price of organic silicon is difficult to maintain high. With the gradual release of new production capacity, Sinochem? The consultation still insists on the judgment of the price trend of organic silicon at the beginning of 2020, and the price of DMC is likely to be maintained in the range of 15,000 to 20,000 yuan/ton for a long time. Sudden events and the turn of off-peak and peak seasons may provide some opportunities to rise in the market, but historical experience proves that short-term high prices are more difficult to maintain.


The Matthew effect continues to strengthen, and leading companies dominate the industry's competitive landscape. The new round of organic silicon capacity expansion is mainly dominated by leading companies. Hesheng Silicon, Xin'an Chemical, and Hubei Xingfa’s new organic silicon monomer production capacity have been successively produced. Follow-up by Hesheng Silicon, Hubei Xingfa, and Shandong Dongyue are still relatively large. Scale expansion plan. At present, the 200,000 tons/year siloxane of Hesheng Silicon Industry Shihezi has entered the trial production stage (expected to be put into operation in February 2021). After the official production, the company will become the largest domestic silicone manufacturer, ranking second only to Dow in the world. Second, if its two phases of 400,000 tons/year siloxane project in Zhaotong, Yunnan can be successfully completed and put into production, Hesheng Silicon Industry will surpass Dow to become the world's first; Hubei Xingfa’s 200,000 tons/year in Wuhai, Inner Mongolia After the completion of the siloxane project, it will rank second in the country.


It is worth noting that in the next three years, under the background of rapid growth in downstream demand for metal silicon, it may enter a recovery cycle. For organic silicon monomer manufacturers, the dual pressure from upstream raw materials and downstream competition may be inevitable. And integrated companies such as Hesheng Silicon Industry will take advantage of its advantages on the cost side to occupy an advantageous position in the competition. In the future, the Matthew effect in the silicone industry will continue to strengthen, and leading companies will dominate the competitive landscape.

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