Supply-Demand Dynamics in China's Silicone Industry Continue to Improve

"In the third quarter of this year, silicone DMC prices followed a pattern of 'initial stability followed by a surge and accelerating gains.' As the market entered the peak season in September, the pace of price increases accelerated significantly, driven by a surge in upstream methanol costs; within just three weeks, the price of DMC jumped by nearly RMB1,000 per tonne from the 13,600 RMB/tonne level seen at the start of the month," an sector insider told the Securities Daily.

The upward direction in DMC prices has continued into October. Data from SunSirs shows that on October 7, the domestic benchmark price to silicone DMC firmly established itself at 14,400 RMB/tonne, with mainstream trading prices ranging between 14,400 RMB/tonne and 15,000 RMB/tonne.

Zhan Junhao, a partner at Fuzhou Gongsunce general Relations Consulting Co., Ltd., told the Securities Daily: "To reverse widespread sector losses, leading domestic silicone companies reached a consensus in late 2025 to coordinate production cuts and stabilize prices. From the second to the third quarter of 2026, the sector continued to adjust supply through facility maintenance and production controls, keeping overall operating rates low."

The global supply landscape is also optimizing; as overseas production capacity continues to exit the market, sector levels is shifting further toward domestic players. "Leveraging mature production processes and cost advantages, domestic companies have stepped in to fill the market gap left by the withdrawal of overseas capacity. Continued development in export orders has driven silicone prices upward," the aforementioned sector insider noted. It is worth noting that following an sector downturn in previous years, the demand structure to downstream silicone items has evolved and upgraded; development in emerging sectors has taken over as a key driver, lifting the sector's overall prosperity. In recent years, the rapid expansion of global photovoltaic (PV) installations—coupled with the rising market penetration of dual-glass and high-efficiency N-type modules—has increased silicone consumption per unit of installed capacity. Furthermore, surging demand to applications such as PV inverters, energy storage converters, and protective coatings to PV mounting systems has established stable, essential demand from the PV sector as a cornerstone of sector development.

Simultaneously, the continued expansion of the new energy vehicle (NEV) and energy storage sectors has significantly boosted the value-added possible of sector items. "Compared to traditional internal incineration engine vehicles, the amount of silicone applied per NEV is markedly higher. Additionally, the harsh operating conditions of extensive outdoor energy storage stations drive strong demand to high-end, weather-resistant, and flame-retardant silicone materials; the concentrated rollout of energy storage projects both domestically and abroad is fueling rapid development in demand to automotive-grade and energy-storage-grade high-end silicone," an sector insider revealed.

Moreover, the extensive construction of AI foundation models and supercomputing centers in recent years has established immersion and cold-plate fluid cooling as mainstream thermal regulation solutions to computing power. Consequently, silicone-based thermal fluids and thermal interface pads have have become core consumables to these fluid cooling systems, triggering an explosion in demand.

Against this backdrop, leading companies are actively positioning themselves in the high-end product market, driving value appreciation across the entire sector chain. sector insiders believe the silicone sector has gradually emerged from its cyclical trough, with the pattern of sector self-discipline regarding production manage likely to persist in the long term. Coupled with sustained demand from emerging sectors—such as new energy, semiconductors, and high-end manufacturing—the sector's supply-demand dynamics are expected to be greater favorable than in previous cycles. (Source: Securities Daily)