supply and demand pattern reverses, silicone prices continue to rise (shareholding)

after nearly a decade of bear market, the global silicone industry has regained its vitality. as of last week, the mainstream transaction price in the organic silicon market was 19,800-20,300 yuan/ton, a sharp increase of 8.1% compared with 18,500 yuan/ton at the beginning of last month. on march 6, the price of organic silicon continued to rise by 1,000 yuan to 21,300 yuan/ton.

　industryinsidersbelievethatthepriceincreaseoforganicsiliconisfirstcausedbythecompletionofovercapacityreductionintheindustry,followedbynstreamwarmerdemand,coupledwithfactorssuchasrisingrawmaterialpricesandenvironmentalprotectionproductionrestrictions,willprovidesupportforsiliconepricesinthefuture.

asamajorcountryinthesiliconindustry,mycountry’sproductionoforganicsiliconmonomersaccountsforapproximately70%oftheworld’stotal.duetosluggishdemandandsevereovercapacity,thedomesticsiliconeindustry’sproductioncapacitybasicallystoppedexpandingafter2014.startingfrom2015,itenteredtheproductioncapacityclearancephase,andlastyearthesupplyanddemandpatternreversed.

accordingtocomprehensivestatisticsfromindustrialsecurities,asoftheendof2016,theactualoutputoforganicsiliconinthecountrywas1.7milliontons,andtheindustry’soperatingrateincreasedbyabout10percentagepointsyear-on-year.atthesametime,industryconcentrationhasalsoincreased,withthetopfivecompanies’productioncapacitysharerisingto65%.currently,mycountry’sorganicsiliconmonomerproductioncapacityis2.855milliontons,andtheeffectiveproductioncapacityis2.3milliontons.

oldproductioncapacityhasbeenwithdrawn,butnewproductioncapacitylackssupplementation.lastyear,exceptforsichuansiliconpeak’s100,000-tontechnicaltransformationandthestartoftrialproduction,therewasnonewproductioncapacityintheindustry.

tianfengsecuritiesjudgedthatenvironmentalprotectionwillcontinuetomaintainahigh-pressuresituationin2017.thecurrentindustryoperatingrateisatarelativelyhighlevelof76%,anditwillbedifficultforsubsequentindustriestoincreasetheoperatingrate.

inadditiontochangesonthesupplyside,nstreamconsumptionisalsoshowingsignsofwarmth.

afterenteringmarch,thenstreammarketoforganicsiliconhasgraduallywarmedup,andpurchaseshaveincreased.currently,themainstreamtransactionpriceof107rubbermarketisaround20,500-21,000yuan/ton,amonth-on-monthincreaseof5.12%;themainstreamtransactionpriceofrawrubberincreasedby7.5%month-on-month.

themosteye-catchingperformancelastweekwastheimportedsiliconeoilmarket.duetothemaintenanceofcorningequipmentinmarchandthereductionofequipmentinfebruary,themarketpricecontinuedtorise.manyagentsevenquoted23,000yuan/ton.abovethehighprice.

withtherecoveryofglobalrealestate,thedemandforsiliconenstreamincludingsiliconerubber,siliconeoil,etc.isgrowingrapidly.atpresent,theeffectivedomesticproductioncapacityofsiliconedmcis1.3milliontons,andtheconsumptionandexportvolumeare1.25milliontons.consideringthatdomesticlarge-scaleequipmentwillundergointensivemaintenancefrommarchtojune,theindustryexpectsthatsiliconepriceswillcontinuetoriserapidly.

accordingtotianfengsecurities’prediction,theindustry’sannualdemandgrowthratewillbe4%inthefuture.90%ofmycountry’ssiliconeproductsaredigestedthroughthedomesticmarket,mainlyintheconstruction,automobileandelectronicindustries.thelattertwoareexpectedtomaintainmedium-to-lowgrowth.

fromashort-termmarketperspective,baichuaninformationbelievesthatthecurrentequipmentstart-upofdomesticenterpriseshasimproved,buttheordersowedbyfactoriesintheearlystagearestillbeingissued,andthemarketsupplywillcontinuetobetight.inthemediumtolongterm,astheoperatingloadincreasessignificantly,priceincreasesmaybelimited.

a-shares:

xin’an co., ltd.: it is the only domestic organic silicon company that completely converts self-produced monomers into nstream products, with an annual production capacity of 300,000 tons.

xingfa group: it has a production capacity of 180,000 tons of silicone monomer.

sanyou chemical: mainly engaged in soda ash and chemical fiber industries, with organic silicon as its subsidiary industry. the company already has a production capacity of 100,000 tons of organic silicon and will build a new 100,000-ton device at the end of 2014. sanyou chemical uses 47% of its silicone for its own use and sells 53% to external parties. data in early august showed that the operating rate of the 100,000-ton unit was low and inventory was tight.