Silicone Oil Prices Show Stabilization in Europe Amid Market Uncertainties

After a three-month period, the prices of Silicone Oil in Europe, specifically in Germany, Belgium, and the Netherlands, have shown resilience and stabilization. In August 2023, Silicone Oil prices dropped to $3380/MT, $3430/MT, and $3480/MT in FOB Hamburg (Germany), FOB Antwerp (Belgium), and FOB Rotterdam (Netherlands), respectively.

The European and North American markets have experienced contrasting trends during this time. Multiple points of convergence and divergence have played a role in this divergence. However, as economic recovery gains momentum in Europe, North America, and Asia Pacific, it is expected to impact the prices of Silicone Oil significantly.

Silicone Oil is primarily used in lubrication, hydraulic, and thermic fluid systems. It also has excellent electrical insulation properties, making it suitable for electrical transmission and distribution systems. The recent increase in demand for Silicone Oil can be attributed to its applications in semiconductor chips as an insulator.

In Europe, Silicone Oil is primarily consumed for machinery maintenance, automotive maintenance, electrical transmission and distribution, and semiconductor production.

Market inquiries have revealed that the prices of Silicone Oil in Europe are still inflated, trading at over 25% of the pre-pandemic level. Manufacturers attribute this inflationary pressure to high energy prices and suppliers' destocking of expensive materials. Another factor driving demand for Silicone Oil is the application of the Chips Act, which promotes localization and a resilient supply chain of critical minerals for semiconductor production, reducing reliance on imports from countries like China.

The stabilization of Silicone Oil prices in Europe can be attributed to improved industrial performance, logistical improvements, and lower energy prices. Recent unemployment figures show a reduction in inflation and stable employment, indicating increased industrial activity and logistical performance. However, there was no observed economic growth. Energy inflation has increased to 8.25% in August 2023 from 5.69%.

In North American markets, the prices of Silicone Oil have been declining, diverging from the European trend over the past three months. This decline, especially in the US markets, can be attributed to increased oil production through fracking and stabilized energy prices. Inventory levels have remained high enough to meet the demand from the automotive and maintenance industrial sectors.

Some manufacturers attribute the decline in silicone prices in August 2023 to uncertainty, causing a decline in demand and consumer purchases. Retailers have reported a decline in automobile sales due to high inventories. Unemployment numbers have also increased, indicating a decline in demand.

Financial experts suggest that the inflationary measures adopted by the US, such as the Inflation Reduction Act, have affected end-use consumers by increasing key interest rates and pushing up necessary expenses. Despite nearing the Federal Reserve's target inflation rate, the Fed has not changed its stance for the future.

Due to seasonal rises in energy prices in Europe, silicone Oil prices are expected to remain inflated in the coming months. However, in North American markets, the prices are expected to stabilize or even improve as the demand situation is expected to improve. The decisions made by the US Fed and European Central Bank in the coming months will significantly impact prices in Europe and North America, affecting global trade.