Market supply and demand
- **Supply**: 2024 is the peak year for the commissioning of new production capacity of silicone monomers in China. According to Zhuochuang Information data, a total of 1.2 million tons of monomer production capacity will be put into production, and the total domestic production capacity is expected to increase to 6.89 million tons, a year-on-year increase of 21.09%. The substantial increase in production capacity has led to sufficient market supply, and even an oversupply situation, resulting in an increased risk of bidding for shipments among companies, and the low price of products may become normalized.
- **Demand**: Downstream demand is generally weak. Since the beginning of the year, the trading atmosphere in the silicone DMC market has been light, and downstream companies are not very active in purchasing. The digestion capacity of silicone products is limited, and it is difficult to form a strong support for the market. Although overseas demand has a positive trend, such as the expectation of interest rate cuts in the United States and the rapid development of emerging economies such as India, which has driven China's organic silicon exports, China's polysiloxane exports reached 319,000 tons from January to July, a year-on-year increase of 39.1%, but it is still difficult to completely offset the lack of domestic demand.


Market price trend
- **The price decline trend is obvious**: Since April 2024, the price center of organic silicon DMC has continued to sink. For example, on April 17, its price reference was 13,840 yuan/ton, which was significantly lower than the previous price. By December, the price of organic silicon DMC continued to fall. The reference price on December 16 was 12,880 yuan/ton, a decrease of 3.02% compared with November 1. In addition to DMC, the prices of other silicone products are also on a downward trend.
- **Analysis of the reasons for the price drop**: First, the concentrated release of new production capacity has greatly increased the market supply pressure, and the situation of oversupply has led to a price drop; second, the downstream demand is insufficient, and it is unable to effectively undertake the production growth brought by the new production capacity, which has intensified market competition and prices have continued to fall; third, although the metal silicon market has stopped falling and stabilized on the cost side, the overall market situation has not improved significantly, and the support for the price of silicone DMC is limited.


Industry competition pattern
- **Industry concentration has increased**: By the end of August 2024, China's silicone monomer production capacity will reach 6.38 million tons/year, and CR5 will increase from 59.0% in 2017 to 63.2%. The industry concentration is relatively high, the voice of leading enterprises in the market has been strengthened, and the scale advantages and cost advantages are more obvious, which is conducive to their advantageous position in the market competition.
- **Enterprises face differentiation**: Against the background of overcapacity and falling prices in the industry, the differentiation between enterprises has intensified. Some large enterprises can resist market risks to a certain extent and even achieve counter-trend growth in performance by relying on their advantages in technology, cost, and industrial chain. For example, Dongyue Silicon Materials achieved operating income of 2.737 billion yuan in the first half of the year, a year-on-year increase of 10.21%, and net profit attributable to shareholders of listed companies of 65.2173 million yuan, a year-on-year increase of 134.05%; while some small and medium-sized enterprises are facing greater operating pressure, declining profitability, and may even suffer losses or stop production.


Future development trend
- **Capacity growth slows down**: Due to the rapid dilution of silicone profits, the new capacity in 2025 will slow down significantly, and the actual new capacity is expected to be less than 500,000 tons. The peak period of capacity expansion has passed, and the industry will enter a relatively stable development period in the future. The decline in capacity growth will help ease market supply pressure and promote the recovery of supply and demand balance.
- **Demand is expected to grow**: With the continuous improvement of the penetration rate of downstream silicone products in new energy vehicles, photovoltaics, home appliances and other fields, the demand for silicone in these fields will continue to grow rapidly. It is expected that the demand for silicone will continue to increase, thereby promoting the further development of the industry.
- **Industry reshuffle accelerates**: The problem of overcapacity is becoming increasingly serious. In the future, companies with insufficient funds and integrated supporting facilities will face the risk of elimination. The industry reshuffle will be further intensified, which will prompt companies to strengthen technological innovation, reduce costs, improve product quality and added value, so as to enhance their own competitiveness and promote the silicone industry to move towards high-quality development.