China Merchants Securities: Silicone prices are rising at the bottom, and industry sentiment is expected to pick up

The Zhitong Finance App learned that China Merchants Securities released a research report saying that according to Baichuan Yingfu information, on February 12, the market price of silicone in East China was 13,500 yuan/ton, up 700 yuan/ton from the previous trading day, an increase of 5.5%. Currently, mainstream silicone monomer manufacturers are strongly willing to raise prices. As the silicone industry's production expansion cycle ends, the market competition pattern stabilizes, and domestic and international market demand is strong. The medium- to long-term supply and demand relationship in the industry will improve, and the boom is expected to continue to rise.

The main views of China Merchants Securities are as follows:

The silicone industry's production expansion cycle has ended, and leading companies have increased their market control

By the end of 2024, the effective production capacity of silicone (DMC) in China was 3.35 million tons, up 26.5% year on year, with an average annual increase of 19% since 2020. In 2024, silicone production was 2.25 million tons, up 24.8% year on year, with an average annual increase of 15% since 2020. After a recent round of strong production expansion, the silicone industry will have no clear new production capacity in the next few years, and the competitive pattern of the industry will stabilize.

Due to the large expansion of production in the domestic silicone industry in 2024, the industry's operating rate fell to 66% in September, then continued to rebound. In January 2025, the industry's operating rate reached 81%, and new production capacity was effectively released. According to Baichuan Yingfu data, there are currently only 13 domestic silicone manufacturers. In terms of DMC production capacity, Hesheng Silicon, Dongyue Silicon, Jiangxi Spark, Xingfa Group, Xinan Co., Ltd., and Luxi Chemical have production capacity of 880,000, 350,000, 300,000, 250,000, and 250,000 tons respectively. CR6 accounts for nearly 70%, and the market control of leading companies continues to increase.

Domestic silicone market demand is growing rapidly, and overseas market demand is strong

In 2024, China's apparent consumption of silicone was 1.82 million tons, up 21% year on year, with an average annual increase of 11.2% since 2020, mainly benefiting from the rapid growth in demand in emerging fields such as new energy vehicles, lithium batteries, photovoltaics, electronics and electrical appliances. At the same time, with the continuous improvement of silicone performance, application fields have also expanded.

In recent years, some overseas silicone devices have aged out, and China's silicone export demand is strong. In 2024, China's silicone export volume was 546,000 tons, up 34% year on year, with an average annual increase of 22.4% since 2020. At the same time, with the expansion of domestic silicone production capacity and the improvement of product quality, China's silicone imports were drastically reduced. In 2024, China's silicone imports were 110,000 tons, down 28.4% from 2020.

The medium- to long-term supply and demand relationship in the industry will improve, and the boom is expected to continue to rise

Since there will be no new production capacity in the silicone industry in the next few years, downstream market demand will continue to grow rapidly, and the supply and demand relationship in the industry will continue to improve. The silicone industry is highly concentrated on the supply side. According to Baichuan Yingfu information, silicone monomer manufacturers are currently determined to raise prices. On the one hand, most manufacturers that deliver orders in the early stages do not have much inventory. On the other hand, production cuts and downstream preparation in the industry are the general trend, which is expected to drive silicone prices to continue to rise. Currently, the silicone market price is 13,500 yuan/ton. The price has just begun to rebound and is still at the bottom of the past ten years. I am optimistic that the prosperity of the silicone industry will continue to rise.

Investment advice: it is recommended to focus on leading domestic silicone companies

Dongyue Silicon (300821.SZ), Xinan Co., Ltd. (600596.SH), Hesheng Silicon (603260.SH), Xingfa Group (600141.SH), Luxi Chemical (000830.SZ), Sanyou Chemical (). 600409.SH

Risk warning: Raw material prices are rising, downstream market demand is insufficient, and new industry supply is emerging.