A comprehensive rally! As expected, August brings surprises. Driven by strong expectations in the macro environment, Some company have successively issued price increase notices, completely igniting market trading sentiment. Yesterday, inquiries were enthusiastic, and the trading volume of individual manufacturers was considerable. According to multiple sources, the transaction price for DMC yesterday was around 13,000-13,200 RMB/ton, and several individual manufacturers have limited their order intake, planning to raise prices across the board!
In summary, the market atmosphere has been fully enhanced, and the prolonged losses faced by upstream and downstream players are set to be repaired. Although many remain concerned that this might be just a fleeting moment, given the current supply-demand dynamics, this rebound has a substantial positive underpinning. Firstly, the market has been in a protracted bottoming process, and price wars among individual manufacturers are increasingly unsustainable. Secondly, the market has reasonable expectations for the traditional peak season. Additionally, the industrial silicone market has also stopped declining and stabilized recently. With the macro sentiment improving, commodities have broadly risen, spurring an increase in the industrial silicone market; futures rebounded yesterday as well. Therefore, under multiple influencing factors, while it is difficult to say that a 10% price increase will be fully realized, a range increase of 500-1,000 RMB is still anticipated.

In the precipitated silica market:

On the raw material front, the sulfuric acid market's supply and demand are relatively balanced this week, with prices remaining stable with minor fluctuations. In terms of soda ash, market trading sentiment is average, and the weak supply-demand dynamic keeps the soda ash market on a downward trend. This week, domestic prices for light soda ash are between 1,600-2,100 RMB/ton, while heavy soda ash is quoted at 1,650-2,300 RMB/ton. With limited fluctuations on the cost side, the precipitated silica market is more constrained by demand. This week, precipitated silica for silicone rubber remains stable at 6,300-7,000 RMB/ton. In terms of orders, individual manufacturers are launching a comprehensive rebound, and the demand for compound rubber has seen some improvement in order intake. This may increase the demand for precipitated silica; however, in a buyer's market, precipitated silica producers find it hard to raise prices and can only aim for more orders while the silicone market is performing well. In the long run, companies will still need to constantly seek solutions amidst “internal competition,” and the market is expected to maintain stability in the short term.

In the fumed silica market:

On the raw material front, the supply of trimethylchlorosilane is increasingly outpacing demand, leading to a significant price drop. The price for trimethylchlorosilane from Northwest manufacturers plummeted by 600 RMB to 1,700 RMB/ton, while prices from Shandong manufacturers decreased by 300 RMB to 1,100 RMB/ton. With cost pressures trending downward, there may be follow-on price drops for fumed silica in a supply-exceeding-demand environment. On the demand side, despite some push from macroeconomic benefits, downstream companies focusing on room-temperature and high-temperature rubber are primarily stocking DMC, raw rubber, silicone oil, etc., with only a moderate interest in fumed silica, resulting in stable, just-in-time demand.

Overall, current quotes for high-end fumed silica are maintaining in the range of 24,000-27,000 RMB/ton, while low-end quotes are between 18,000-22,000 RMB/ton. The fumed silica market is expected to continue its horizontal run in the near term.

In conclusion, the organic silicon market is finally seeing signs of a rebound. Although there are still concerns within the industry regarding the upcoming production of 400,000 tons of new capacity in Luxi, based on previous new capacity release processes, it is unlikely to impact the market significantly in August. Moreover, major manufacturers have shifted their strategies from last year, and to realize product value restoration, two leading domestic manufacturers have taken the lead in issuing price increase notices, having a positive effect on both upstream and downstream sectors. After all, in a price war, there are no winners. Each company will have different choices at different stages when balancing market share and profits. From the perspective of these two companies' supply chain layouts, they are among the best in terms of domestic high-end products and have a high self-use ratio of raw materials, making it entirely understandable for them to prioritize profits.

In the short term, the market seems to have more favorable factors, and supply-demand contradictions may ease to some extent, indicating a steady yet improving trend for the organic silicon market. Nevertheless, long-term supply-side pressure is still challenging to overcome. However, for organic silicon companies that have been in the red for nearly two years, the opportunity to recover is rare. Everyone must seize this moment and closely monitor the movements of the leading manufacturers.