transport
Silicone products are called "industrial monosodium glutamate". Downstream products such as silicone oil, silicone rubber and silicone resin are widely used in construction, electronic appliances, textile, automobile and other industries, such as room temperature sealant in construction, potting glue in LED packaging, auxiliaries in textile, etc. As the upstream of the industrial chain, the price of organosilicon monomer largely determines the trend of downstream organosilicon products. At the same time, the current difficulties of organosilicon monomers will also bring severe challenges to the entire industrial chain.
One
Supply pressure, slowing demand growth, international trade turbulence and epidemic situation spread, and the prospect of silicone monomer is unclear
After enjoying the good days of 2017-2018, the silicone monomer enterprises are facing the dilemma of overcapacity and weak price. The business cycle stopped abruptly less than two years later, but the optimistic expectation of the industry at that time prompted enterprises to invest in new production capacity. Now, the shadow of oversupply is once again hanging over the silicone industry.
However, the demand side is difficult to help the silicone industry. The downward pressure of domestic economy is increasing, and the growth rate of demand for silicone products is obviously declining. The uncertainty of Global trade is still large, and at present, the new crown epidemic is spreading overseas, and the export of organosilicon products and downstream end products is seriously hindered. Due to the combination of many factors, the price of organosilicon monomer has been running in a weak position since the high and rapid decline, and it is difficult to see the hope of recovery. The prospect of organosilicon monomer industry is not very clear.
Two
The business cycle is less than 2 years, and the silicone monomer industry is facing the risk of overcapacity again
Around 2017, with the rapid growth of domestic economy, the silicone industry gradually got rid of the shadow of overcapacity. Under the influence of environmental protection supervision, the price of raw materials increased and the production of organosilicon monomer was limited. In the second half of 2017, the silicone industry was in short supply at one time, and the prices of silicone monomers and their downstream products began to rise sharply. Taking advantage of the boom cycle, the price of organosilicon monomer continued to rise until July 2018, and the price of DMC (dimethylcyclosiloxane mixture) once hit a high of 35000 yuan / ton. At that time, the industry was generally optimistic about the market of organosilicon. Considering that the new construction cycle of monomer device is generally 2 years, the industry view is that the boom cycle of organosilicon industry will last until 2020. Hesheng silicon industry, Shandong Dongyue and other enterprises have also launched the expansion plan of monomer capacity.
However, the market situation suddenly changed, and the price of organosilicon monomer fell sharply from August to October 2018. At the end of October, the price of DMC was only about 20500 yuan / ton, which fell more than 40% compared with the high price in only three months. On the one hand, the high price of silicone monomer drives the price of downstream products such as silicone rubber to rise, which makes it difficult for end users to continue at high cost, and the demand for silicone products shrinks. On the other hand, there is "irrational" sentiment in the market in 2018. Although the influence of environmental supervision is gradually fading and the price of raw materials is falling, the price of organosilicon monomer still keeps rising rapidly.
As a starting point, organosilicon began its "long way of decline", and the price has remained weak so far, which also announced the end of the business cycle of organosilicon industry, which only lasted for less than 2 years.
In terms of new production capacity, in 2019, the 200000 t / a silicone monomer unit of Hesheng silicon industry in Shanshan, Xinjiang was completed and put into operation. This domestic silicon industry chain giant continues to extend its influence to the downstream of the silicon industry chain. After this project, according to incomplete statistics of Sinochem consulting, the newly built and proposed capacity of organosilicon monomer disclosed in China is still about 800000 tons / year. Including: 300000 t / a new capacity of organic silicon monomer in Dongyue, Shandong (supporting 200000 t / a deep processing of downstream products), 200000 t / a new capacity of organic silicon monomer in Yunnan energy investment (supporting 200000 t / a downstream products), 300000 t / a organic silicon monomer technical transformation project in Hengye, Inner Mongolia (increasing 150000 T / a monomer capacity), 140000 T / a new capacity of Xingfa, Hubei. According to the construction plan, these projects will be gradually completed and put into operation in 2020-2021. Assuming that the above-mentioned new capacity is successfully achieved, the capacity of organosilicon monomer will be increased by about 25% in 2021.
Corresponding to the large-scale expansion of silicone monomer production capacity, the growth rate of terminal consumption of silicone in China has declined significantly, while the uncertainty of international trade and global economy has also cast a shadow on the export market of silicone related products. The consumption of organosilicon is closely related to economic development. Organosilicon products are widely used in construction, electronics, textile, automobile and other industries.
In terms of domestic market, the downward pressure of China's economy is increasing at present. Taking the two pillar industries of construction and automobile as an example, the total output value of construction industry in 2019 increased by about 5.1% year-on-year, far lower than the growth rate of 9.9% in 2018; the production and sales volume of automobile industry in 2019 decreased by 7.5% and 8.2% year-on-year respectively, the decline rate is further expanded than that in 2018, and the growth rate of demand for organosilicon products in China has declined significantly.
In terms of export market, the global economic slowdown affects the export market. Meanwhile, the trade friction between China and the United States adds uncertainty to the world trade. The export of silicone products and end products are affected to varying degrees. In this context, the growth of demand side is difficult to provide support for the expansion of silicone monomer production capacity.
Three
Under the influence of the epidemic situation, the price of organosilicon monomer plummeted, increasing the difficulty of recovery of organosilicon industry
The new crown epidemic has had a great negative impact on the price of organosilicon monomer. At present, the price of DMC has fallen below 16000 yuan / ton. Although the domestic epidemic has been controlled, the spread of the overseas epidemic, the number of confirmed cases soared. In the short term, the epidemic in Europe and the United States will lead to the stagnation of local industrial production and the obstruction of logistics and transportation, and the export of silicone products and downstream end products will be seriously hindered.
Four
Facing difficulties, silicone monomer enterprises need to actively look for Countermeasures
In view of the current difficulties faced by the silicone industry, Sinochem consulting suggests that enterprises should respond from the following three aspects.
【1】 Reduce production costs
According to the prediction of the market supply-demand relationship, with the gradual release of new capacity, the price of organosilicon monomer is likely to remain at a low level, and DMC is likely to stay in the range of 15000-20000 yuan / ton for a long time. Therefore, by improving the yield of second grade A, optimizing energy consumption and material consumption, and using by-products efficiently, the production cost will be reduced, which will effectively improve the competitiveness of the enterprise in the predicament.
【2】 Extending to downstream high-end products
The core technologies of application development and formula research and development of high value-added downstream products in silicone industry are still in the hands of multinational enterprises such as Dow Corning and wacker. Extending to downstream high-end products, on the one hand, it can digest its own silicone monomer production capacity, on the other hand, it will provide enterprises with sustainable higher profits.
【3】 Actively explore new opportunities overseas
One belt, one road, is to explore new opportunities for overseas markets. Especially, by docking China's "one belt and one way" strategy to develop the market of the countries along the way, it will provide a new way to resolve excess capacity of silicone monomer.
Author: Xu Jizhang
Sinochem · consulting
Senior Consultant
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Sinochem · consulting
Focusing on energy, petrochemical, materials, specialty chemicals, agriculture, medicine and other industries, specializing in providing customized consulting services such as strategy, market, investment, product compliance, environment and energy management, safety management, chemical industry and material standard setting