Silicone Oil prices turned bullish in the US, Stable in Europe in January 2024

Texas (USA): Silicone Oil prices showed a turnaround in the first month of 2024, with stronger price recoveries observed in the cosmetics section and consumer electronics markets in the USA and East Asia. However, prices remained subdued in European markets due to the economic slump continuing into the first month of FY24. January saw relatively lower demand for Silicone Oil due to downturns and lower operational capacities caused by adverse winter conditions across the globe. Supply disruptions persisted, with strong price rises even offsetting weak demand as suppliers continued to undertake safety stocks due to the Suez Crisis.

In European markets, Silicone Oil prices remained relatively stable on a monthly basis, with lower trading activities observed. Challenges related to high input costs and negative inventory pressure persisted in the European Silicone Oil supply chain. Feedstock markets reflected a similar trend, implying that the supply chain of Silicone Oil remained streamlined with demand sentiments. A further dive into the Silicone Oil market in Europe revealed that demand from the electronic and semiconductor markets remained subdued, with newer orders for Silicone Oil slowing down further despite marginal improvements in internal riverine logistics by the end of the month.

Market sentiment remained weak in January due to a tightened credit environment and fears of inflation lingering over the FY24 economic environment. VCI Germany continues to maintain that recovery in Silicone Oil and allied petrochemicals will begin once inventory pressure increases. Wacker Chemie, a major supplier of Silicone Oil globally, revealed in their preliminary results that lower petrochemical prices globally, coupled with lower output and capacities, significantly affected their EBITDA, with a fall of 73% in FY23 compared to FY22. Analysts argue that European prices compared with American and Asian prices continue to remain uncompetitive owing to EU regulations and sustainability mandates, weak orders from downstream, and overpriced inventories largely owing to subdued consumer demand. Silicone Oil, largely used for automotive and personal care verticals, continued to face high inventory presence in Europe. Analyzing prices, European Silicone Oil remained 25% higher than American prices as US markets destocked significantly in FY23 while European markets continued to hold onto stock.

In Asian and American markets, Silicone Oil prices turned bullish largely owing to supply disruptions, with marginal upticks in procurement from US markets as retailing and consumer confidence continued to improve. January is expected to remain subdued from the perspective of consumers owing to weak demand observed in the market, thus inventory pressure is expected to remain relaxed. Silicone Oil demand from automotive and semiconductors is expected to remain subdued in the given month, largely owing to a fall in EV production in the given quarter as major producer Tesla is readjusting production and has called back the majority of EVs supplied in US markets to undertake autopilot and safety testing, further pushing back the procurement situation into H2 FY24. Personal care demand is showing an uptick in procurement in the USA as producer margins continue to remain strong, largely owing to strong petroleum and petrochemical export contributions to the national income and employment in January. East Asian markets observed stocking up, elevating regional prices owing to the recovery in Silicone Oil prices in semiconductor and personal care verticals as chips and semiconductor exports in East Asian economies continue to improve, affecting an uptick in Silicone Oil prices in the region.

ChemAnalyst’s research on pricing revealed that the USA is expected to show upward recovery in Silicone Oil prices in the coming months, with improved discretionary spending by consumers expected to increase as energy prices continued to deflate in January while wage growth remained strong.