Global Market Outlook on Silicon Rubber
The global silicone rubber market is currently facing a supply crunch. Owing to high demand growth rates (10–20%) and not many significant capacity additions being announced, the market is expected to remain tight up to 2021. It is recommend to continue sourcing from the integrated players (Dow Corning, Wacker, Shin-etsu, and Bluestar), owing to their control along the silicone value chain.
Silicone Rubber Market Analysis
The global silicone rubber market is facing a supply crunch, with demand outpacing supply. The main factors leading to this supply deficit are as follows:
- Shift in production landscape: Most of the major Western producers have shifted their production to China, owing to lower cost of production. They have either reduced their operating rates or idled production lines
- Reduced siloxane supply: There has been a shortage of siloxane monomer after Momentive shut down its Leverkusen plant in Germany
- Chinese government environmental inspections: Supply was further hampered when the Chinese government carried out environmental inspections during 2017, which caused most of the silicone players to shut down or lower operating rates for a brief period
- China is the major producer and consumer of silicone rubber with 580,000 MTPA installed capacity and demand at 420,000 MTPA, respectively. However, quality issues of Chinese silicone rubber still persists
Silicon Supplier Market Share
- Integrated global players: Dow Corning, Wacker, Shin-etsu, and Bluestar Silicones are the four major global silicone rubber players, who are backward integrated up to silicon metal and have full control over the silicone value chain
- Dow and Wacker hold the maximum market share and generally tend to dictate price movements
- Momentive is another major global player, who is backward integrated to siloxanes. However, they have been struggling with a weak upstream portfolio after they shut down their siloxane plant at Leverkusen, Germany. Additionally, Momentive’s financial position is also weak, which does not make them a viable sourcing option
- A lot of intra-industry trade for siloxane monomer happens among the five major silicone suppliers
- Shandong Dongyue is the only Chinese silicone rubber manufacturer, who is backward integrated to siloxane monomer, while KCC Basildon is the only Korean supplier
- Ties with Dow Corning: Dow has recently issued a sales control on production. It also supplies most of the siloxane monomer, along with the end-capping agent to non-integrated silicone rubber manufacturers. It has been limiting the supply of both and directing it toward captive consumption
Silicone Rubber Market Overview
The global silicone rubber market continued to face a supply crunch in 2018, owing to shift in production landscape, Chinese environmental inspections, and lack of significant capacity expansions. Supply and demand will continue to remain neck to neck up to 2021, owing to high growth rates (10–15%) exhibited by silicone rubber.
China constitutes more than half the demand share for silicone rubber while China, Europe, and North America together account for more than 80% of downstream demand.
- Supply–Demand Dynamics: There was a global supply deficit in the silicone rubber market in 2017, with demand significantly higher than production. Silicone rubber demand has been growing at a very fast pace with a CAGR of 10% for HTV rubber and even higher for Liquid Silicone Rubber (LSR)
- Factors Causing Supply Crunch: One of the main factors for tightened supply situation was that most of the major Western producers had shifted their production base to China, owing to lower cost of production. They either reduced operating rates in the Western plants or idled production lines. The silicone market has also been facing a siloxane monomer shortage after Momentive shut down its siloxane monomer plant in Leverkusen, Germany in November 2016
- Production was further hampered in 2017 when the Chinese government carried out environmental inspections, due to which, many producers had to temporarily shut down production or operate at low rates. This supply crunch has continued in 2018, as most Chinese producers have not increased their operating rates to pre-inspection levels