Dimethicones

Global Market Outlook on Dimethicones

MARKET OVERVIEW

• Global Silicones Production: 2.96 MMT (2022E)

• Global Silicones Demand: 2.51 MMT (2022E)

• Global Dimethicone Demand: 291 kMT (2022E)

• Global Dimethicone Demand CAGR: 3-4 percent (2023–2025F)

Capacity Demand Snapshot

• The supply has been tight last year, owing to feedstock siloxane monomer and OH polymer shortage. Supply continued to be extremely short in H1 2022, while it is expected to ease during end 2022-early 2023, owing to planned capacity additions

Dimethicones Demand Market Outlook

• Global dimethicone demand is projected to grow at 3 percent until 2025. APAC will be the major region driving demand for dimethicones, due to high growth rates from the hair care and skin care markets

• Dimethicone growth rates would be lesser in North America and Europe, due to mature personal care industry as compared to APAC

Dimethicones Industry Best Practices

• CPG buyers usually source dimethicones via the contract model. The contract length is typically a year or less, due to constant innovations and high quality standards required by downstream personal care products

• CPG buyers commonly opt for Single Sourcing, as supplier switching is not a viable option in order to mitigate the risks associated with quality reduction

Sourcing Model

• Single sourcing model is followed by most CPG buyers

• Supplier switching is not usually practiced in the dimethicone market, as CPG buyers will not lower the quality standards of their personal care ingredients

• CPG buyers can leverage the innovation and quality standards offered by the supplier

Contract Length 

• Typical length of contract followed is usually one year or less, and incorporates quarterly price revisions of both the feedstock prices–methanol and silicon metal

• Contract terms would include technical assistance from dimethicone manufacturers, in terms of quality and innovation

• These are two key parameters, as there is constant demand from the downstream hair care and skin care segments, for customized and novel dimethicones

Negotiation Levers

Suppliers

• The main negotiation lever of dimethicone suppliers would be leveraging feedstock price volatility as most suppliers are not backward integrated

• Suppliers also leverage on the high quality and niche aspect of dimethicones

Buyers

• Innovation usually involves sharing confidential formulation data and patents

• Buyers will ensure that contract terms involve clauses that include patent right protection, and non-disclosure of formulation data. This is done to ensure that there is no breach of trust

Dimethicones Cost Structure Analysis

The raw materials, silicon metal and methanol, significantly impact dimethicone cost of production in North America and APAC, while utility costs play a greater role in Europe.

• Silicon is the key feedstock for dimethicone production, as it is more expensive compared to methanol. However, the highly volatile methanol prices also impact dimethicone prices

• Silicon prices are higher in North America and Europe compared to APAC

• The European electricity costs are higher compared to the other regions, owing to the shift toward renewable source of energy. This is due to the strict regulatory environment to cater to the requirements of the Energy Efficiency Action Plan, which requires a 33 percent reduction in energy consumption

• Raw material costs contribute more to cost of production in North America and APAC, while the utility cost in Europe is high