Silicone Oil Prices Plunged Further in December Amidst Weak Global Manufacturing

Silicone Oil prices continued to remain subdued in December amidst festive demand and strong retail and manufacturing results posted by major economies in November. Prices were assessed in the range of USD 3,400/MT on an FOB basis and USD 2,300/MT in China and US markets, respectively, indicating a decline of 4% on a month-over-month (MoM) basis. Furthermore, feedstock prices deflated in China and the USA, while they remained stability in Europe due to steady natural gas prices. Despite high inventories in the EU, negative cost pressure for Silicone Oil persisted throughout the month.

In European markets, Silicone Oil prices plunged by 4% due to declining demand sentiment, attributed to the continual contraction in EU manufacturing, lower operating capacities of the plants, and a weak consumer market. While supply challenges persisted in European markets due to high riverine water levels, the major challenge of weak consumer demand persisted despite falling inflation. Market participants reported that Christmas festivities and year-end sales failed to generate necessary consumer confidence among EU residents. One market participant reported that despite falling inflation in some parts of the EU, inflation rose, and consumer confidence turned slightly negative for FY24 by the end of December, forcing them to undertake cost-cutting for essentials. A Belgian newspaper reported that consumers continue to face high commodity prices in retail and prefer prioritizing essential expenditures over other additional expenses. Governments reducing expenditure to control deficits may lead to increased prices, especially for Silicone Oil in downstream personal care end-uses. Cosmetics and personal care industry experts support the notion that Silicone Oil prices, deflating on a year-over-year basis, are not stimulating the desired demand sentiment from consumers, largely due to high mortgage and interest rates, a tightened labor market, and, despite Germany adding more employment in the last six months, a failure to pick up. Silicone Oil producers struggled to find buyers in Europe with a relatively warmer winter compared to previous years. The manufacturing slump in the Eurozone continues to persist, with European crackers attempting to convert to LNG/gas-based production, providing upstream supply constraints. Newer orders continue to decline, albeit at a slower pace, indicating marginal improvement as import prices continue to deflate.

In American and Asian markets, Silicone Oil prices plunged largely due to a fall in manufacturing activities observed, coupled with destocking undertaken in the US, as US Federal Reserve minutes indicate delayed rate cuts. Negative price pressure for Silicone Oil persisted in the given timeframe, albeit with increased support from falling inflation. Chinese and US inflation continue to fall at a faster pace, with the US adding strong numbers to the labor force, signaling that consumer demand remained subdued. Silicone Oil producers in China are maintaining high inventories since the export market remained subdued with lower demand from traditional markets like India, etc.

ChemAnalyst expects a further fall in prices in January 2024 as demand is expected to remain subdued, and US markets continue to add more crude, giving further negative cost pressure to the Silicone Oil value chain. Manufacturing is expected to recover marginally, offset by weaker demand and strong winter weather over Asian markets. Towards the end, procurement of Silicone Oil may improve from China, pulling up prices due to Chinese New Year holidays and shipping container shortages across Indian Ocean lanes.