According to Zhijia Finance APP, China Merchants published a Research Reports stating that on February 12, the price of organic silicon in the East China market was 13,500 yuan/ton, an increase of 700 yuan/ton compared to the previous trading day, a rise of 5.5%. Currently, major organic silicon manufacturers have a strong willingness to maintain prices. With the end of the organic silicon industry's expansion cycle, the market competition pattern is stabilizing, and the demand in both domestic and international markets is strong, the supply-demand relationship in the industry is expected to improve in the medium to long term, and the prosperity is likely to continue to rise.

The main points from China Merchants are as follows:

The expansion cycle of the organic silicon industry has ended, and leading enterprises have increased market control.

By the end of 2024, the effective production capacity of domestic organic silicon (DMC equivalent) will be 3.35 million tons, a year-on-year increase of 26.5%, with an average annual growth rate of 19% since 2020. The production of organic silicon in 2024 is expected to reach 2.25 million tons, representing a year-on-year increase of 24.8%, and an average annual growth rate of 15% since 2020. After the recent strong expansion cycle, there are no clear plans for new capacity in the organic silicon industry in the coming years, leading to a stabilization of the competitive landscape.

In 2024, due to significant expansion in the domestic organic silicon industry, the industry operating rate fell to 66% in September, but then began to rebound continuously, reaching 81% in January 2025, with new capacity being effectively released. According to Baichuan Yufu data, there are currently only 13 domestic organic silicon manufacturers. In terms of DMC capacity, Hoshine Silicon Industry, Shandong Dongyue Organosilicon Materials, Jiangxi Starfire, Hubei Xingfa Chemicals Group, Zhejiang Xinan Chemical Industrial Group, and Luxi Chemical Group have capacities of 0.88 million, 0.35 million, 0.35 million, 0.3 million, 0.25 million, and 0.25 million tons respectively, with CR6 accounting for nearly 70%, indicating increasing market control by leading enterprises.

The demand for organic silicon in the domestic market is rapidly increasing, and the demand in overseas markets is also robust.

In 2024, China's apparent consumption of silicone reached 1.82 million tons, a year-on-year increase of 21%, with an average annual growth of 11.2% since 2020, primarily benefiting from the rapid growth in demand from emerging fields such as New energy Fund, Lithium Battery, photovoltaics, and electronics. At the same time, with the continuous improvement in silicone performance, the application areas have also expanded.

In recent years, some aging overseas silicone facilities have been withdrawn, and China's demand for silicone exports remains strong. In 2024, China's silicone export volume is projected to be 0.546 million tons, a year-on-year increase of 34%, with an average annual growth of 22.4% since 2020. At the same time, with the expansion of domestic silicone production capacity and improvement in product quality, China's silicone import volume has significantly decreased, with 0.11 million tons expected in 2024, a decrease of 28.4% from 2020.

The medium and long-term supply-demand relationship in the industry is expected to improve, and the prosperity level is likely to continue to rise.

Due to the lack of new production capacity in the silicone industry in the coming years and the sustained rapid growth in downstream market demand, the supply-demand relationship in the industry will continue to improve. The supply side of the silicone industry is highly concentrated. According to Baichuan Yingfu information, manufacturers of various silicone monomers currently have a strong determination to maintain prices. On one hand, most manufacturers have little inventory due to previous order deliveries; on the other hand, production cuts in the industry and downstream stocking are trends that are expected to promote a sustained increase in silicone prices. Currently, the market price of silicone is 13,500 yuan per ton, with prices just starting to rebound, still in the bottom range of the past decade, and a bullish outlook on the prosperity of the silicone industry.

Investment suggestion: It is advised to focus on leading domestic silicone enterprises.

Shandong Dongyue Organosilicon Materials (300821.SZ), Zhejiang Xinan Chemical Industrial Group (600596.SH), Hoshine Silicon Industry (603260.SH), Hubei Xingfa Chemicals Group (600141.SH), Luxi Chemical Group (000830.SZ), Tangshan Sanyou Chemical Industries (600409.SH).

Risk warning: Rising raw material prices, insufficient downstream market demand, and new industry supply.