Current Industry Landscape and Future Outlook
I. Supply & Demand Status: Capacity Relocation, Intensifying Competition, and Structural Imbalance
1. Global Capacity Shifts East; China’s Self-Sufficiency Strengthens
Over the past five years, global organosilicon monomer capacity has grown at a compound annual growth rate (CAGR) of 9.96%, with production increasingly shifting to China. By 2025, China’s share of global capacity has risen to 77.33%.
Overseas producers face high energy and labor costs and are increasingly focusing on downstream deep-processing products rather than expanding monomer capacity. Some have even reduced output—for example, Momentive has shut down 305,000 tons of capacity.
China’s self-sufficiency in primary silicone products has improved significantly. Import dependence fell below 10% in 2022 and further declined to below 5% by August 2025. Imports are now mainly concentrated in high-end and specialty applications.
2. Domestic Expansion Slows; Industry Concentration Slightly Declines
Over the past decade, China’s monomer capacity has continuously increased, accelerating in the last five years with a CAGR of 14.48%.
In 2025, however, no new capacity was commissioned. Industry concentration has edged lower:
- CR3 declined from 46.54% (2021) to 46.18%
- CR5 fell from 64.68% to 61.19%
New capacity has increasingly moved toward regions with lower electricity costs and abundant metallic silicon resources—such as Xinjiang, Yunnan, and Inner Mongolia.
- Northwest China capacity: 1.4 million tons (19.83%)
- East China capacity: 3.67 million tons (51.98%), mainly via expansion of existing plants
3. Output Growth with Declining Utilization; Overcapacity Persists
Driven by previous capacity additions and downstream demand, China’s monomer and intermediate output has grown steadily. However, after peaking in 2022, operating rates have declined.
In the first three quarters of 2025, capacity utilization stood at 76.15%, indicating continued overcapacity.
Intermediate output reached 19.72 million tons in the first three quarters, up 6.46% year-on-year.
Between February and April, producers limited output to stabilize prices. Production recovered from May onward, but supply-demand fundamentals weakened again.
4. Demand Growth Slows; Consumption Structure Shifts
Over the past decade, intermediate consumption rose steadily. However, growth momentum has cooled in recent years.
In the first three quarters of 2025:
- Cumulative consumption reached 1.62 million tons
- Year-on-year growth was 5.5%, lower than supply growth
DMC self-consumption ratio stands at 70%, with some companies exceeding 90%.
Consumption structure:
- Silicone rubber remains dominant
- Silicone oil share has increased rapidly
- By 2024:
- Silicone rubber share: 59%
- Silicone oil share: 38.77%
- Silicone resins and others: relatively small proportion
5. Export Growth Slows; Competition Intensifies
Polysiloxane exports have grown steadily in recent years, serving as an important buffer for domestic oversupply.
However, in 2025 export growth slowed due to global economic headwinds:
- Jan–Aug exports: 373,200 tons
- Growth rate: 1.47%
- Export dependence ratio: 21.23%
Exports to certain Belt and Road countries increased, while volumes to other markets declined.
The widening supply-demand gap has intensified competition. DMC has been loss-making since September 2022.
II. DMC Prices & Profitability: From Boom to Deep Losses
1. Price Collapse to a Decade Low
DMC prices peaked above RMB 60,000/ton in October 2021 before entering a prolonged decline.
In the first three quarters of 2025:
- Prices first rose, then fell
- The low point reached RMB 10,200/ton—the lowest in nearly 10 years
In July, rising metallic silicon costs and Dongyue’s plant shutdown triggered an off-season rebound. However, demand was front-loaded into August–September, reducing seasonal volatility.
2. Strong Cost Linkage
DMC prices are highly correlated with metallic silicon costs. Since 2022, metallic silicon’s linkage with polysilicon expansion has amplified cost volatility for DMC.
Downstream products such as 107 rubber, 110 rubber, and methyl silicone oil show similar price movements due to DMC’s high cost share in production.
3. Sustained Losses Pressure Listed Companies
DMC has remained in loss territory since September 2022.
By September 26, 2025:
- Average loss: RMB 1,204/ton
- RMB 220/ton deeper than the same period last year
In the first half of 2025:
- 17 listed silicone companies saw net profit decline by 54%
- Hoshine Silicon reported its first loss
- Companies such as Hengxing Chemical, Runhe, Huitian, and Sibao performed relatively better
III. Industry Outlook: Gradual Rebalancing and Strategic Transformation
1. Slower Supply Growth
Over the next five years, global new capacity will remain concentrated in China.
Dow plans to shut part of its UK monomer capacity in 2026.
By 2029, China’s global share is projected to rise to 84.72%.
Domestic expansion will slow significantly, with a five-year CAGR of only 2.17%. No new projects are likely in 2026; about 400,000 tons may be commissioned in 2027.
2. Emerging Demand Drivers
Key growth sectors:
- New energy vehicles (silicone usage per EV is 7× that of traditional vehicles)
- Electronics and electronic adhesives
- Medical and healthcare (aging population, surgical and implant applications)
Traditional sectors such as construction and textiles are slowing, limiting overall growth to 5–7%.
3. Price Outlook
Supply-demand imbalances may gradually ease around 2027.
Forecast DMC average price (2025–2027): RMB 11,500–12,500/ton.
Short-term outlook:
- October: RMB 10,500–11,500/ton (supported by maintenance and low inventories)
- November–December: RMB 10,000–11,000/ton (seasonal demand slowdown)
4. Policy Support & Strategic Shifts
As a strategic emerging material, silicone benefits from national industrial policy support.
Leading companies are:
- Optimizing product structure
- Expanding into downstream deep processing
- Pursuing high-end localization
- Entering new energy materials
- Engaging in mergers & acquisitions
- Expanding overseas markets
IV. Industry Q&A Highlights
Q1: Outlook for DMC Exports?
DMC exports remain minimal due to hazardous classification. Growth will come from polysiloxane exports (107, 110 rubber, silicone oils). Belt and Road markets show strong momentum. Capacity shutdowns by Momentive and potentially Dow may further increase exports.
Q2: Overseas Capacity Utilization?
Overseas plants operate at 60–70% utilization, particularly unstable in Europe and the US due to energy costs. Shin-Etsu maintains higher stability but mainly serves domestic markets. Aside from Dow’s 2026 exit plan, no major shutdowns are expected.
Q3: Brightest Downstream Segments?
New energy and electronics will lead growth over the next three years. Domestic demand growth likely moderates to 5–7%.
Q4: Demand Structure Changes?
Construction adhesives slow; large brands gain share. Photovoltaic and electronic adhesives offset the slowdown. High-temperature silicone rubber demand in EVs, wearables, and cables is rising significantly.
Q5: Near-Term Price Outlook?
No confirmed new capacity in 2025–2026. October maintenance supports prices, but weak downstream demand caps gains. Seasonal slowdown expected in November–December.
Conclusion
The silicone industry has transitioned from extreme boom to prolonged restructuring.
From RMB 60,000/ton to RMB 10,000/ton, the downturn reflects structural oversupply and cyclical pressure.
However, with supply growth slowing, demand upgrading, and policy support strengthening, the industry may gradually approach rebalancing around 2027.
The “tough years” may not be over—but structural transformation is already underway.
