Fumed Silica Market Rebounds in China During June Amidst Supply Chain Disruption

The price of Fumed Silica in China experienced a significant surge in June, driven by a confluence of factors impacting both supply and demand. Disruptions in the supply chain have played a major role in the price increase. These disruptions were directly linked to the ongoing rainy season and subsequent port closures due to heavy rainfall and infrastructure damage. Rising water levels caused by heavy rainfall inundated critical transportation infrastructure, including roads, bridges, and railway tracks. This effectively halted the movement of goods and raw materials across affected regions. The resulting shortages of essential supplies in flooded areas and delays in deliveries to other regions had a domino effect, impacting various supply chains, including those for Fumed Silica.

The market of Fumed Silica witnessed a significant rebound to settle at USD 4884/MT, FOB Shanghai with a hike of 1.8% during June 2024. The disruptions caused by flooding also led to shortages of resources needed for manufacturing and construction. This included limited access to raw materials due to flooded mines, quarries, and agricultural fields. These shortages further exacerbated the situation and contributed to the price rise. Additionally, the ongoing rainy season and the potential for further flooding could continue to disrupt the supply chain. Another contributing factor was the increase in clinker prices, a key raw material in cement production. This price hike originates from upstream and downstream areas along rivers, impacting the overall production cost of cement. Since Fumed Silica is often used as an additive in cement, rising production costs naturally translate to higher prices for Fumed Silica as well. While downstream ports were operating relatively stable, staggered production in other regions raised concerns about a potential decrease in overall cement supply. This, combined with the desire of manufacturers in East China to improve profits, led to price hikes in the cement market. This upward trend in the cement market had a knock-on effect, pushing Fumed Silica prices upwards as well.

Adding fuel to the fire is the recovered demand for Fumed Silica from the downstream construction sector, particularly in East China. This increased demand, coupled with the supply chain disruptions, has put a significant strain on available supplies. The rise in temperature and the approach of the peak sales season of the Dragon Boat Festival has fueled increased demand for downstream products, including cement.  With limited supply and higher demand, the price of Fumed Silica naturally rose. As per ChemAnalyst, the price of Fumed Silica in China is expected to decrease in July 2024 amidst improvement in supply chain disruptions.