Slow Downstream Recovery and Oversupply Drive Down Global Silicone Oil Prices

Since the commencement of March 2023, the prices of Silicone Oil have been persistently experiencing a bearish trend in the global market owing to the low-cost pressure exerted by feedstock Silicone metal prices. The tepid demand dynamics, firm inventories, and the growing fears of a recession, triggered by the failure of key banks in America and Europe, coupled with aggressive rate hikes by central banks to tame inflation, have further impacted the pricing sentiments of Silicone Oil.

In the Chinese market, Silicone Oil prices have declined due to the sluggish demand outlook from the downstream industries. Moreover, the production cost of Silicone Oil in the domestic market has remained minimal due to the weak feedstock Silicon metal prices. On the other side, the demand for Silicone Oil from end-user industries such as cosmetics, construction, and others has remained lackluster in domestic and overseas markets, with market participants reporting limited instances of new orders. China's Purchasing Managers' Index (PMI) also dropped to 50.2 points in March, further impacting the overall market dynamics of Silicone Oil in the domestic market. Hence, the prices of Silicone Oil SC-85% 100 cst FOB Shanghai were assessed at USD 2800/MT during March 2023.

Similarly, in the German market, Silicone Oil prices have plunged by 3.1% due to the supply fundamentals remaining firm while the demand dynamics have capitulated. The already bearish sentiment in the market has been further deteriorated by the US banking crisis and the latest Credit Suisse debacle. Furthermore, the consumption rates from downstream industries, such as automotive and cosmetics, have stagnated. At the same time, the material availability has been firm due to the stable production rates coupled with a steady flow of imports amid declining freight charges, leading to a decline in Silicone Oil prices. Moreover, the European region has witnessed a drop in PMI for March 2023 as Eurozone Manufacturing PMI declined to 44.7, measuring a dip of 3.6% on a monthly basis, and remained in contraction. Thus, prices of Silicone Oil SC-85% 100 cst FOB Hamburg were assessed at USD 3750/MT during march 2023.

In the US market, Silicone Oil prices have shown a downtrend due to weak demand dynamics and ample supply in the region. Imports from Asian countries have remained firm, leading to better material availability in the US ports or domestic market. Also, rates for shipping containers from East Asia and China to the US have edged lower due to sluggish demand. Furthermore, US manufacturing activity slumped in March due to tighter credit conditions, with the PMI dropping from 47.7 to 46.3. Market participants reported that if economic headwinds continue to affect the automotive and construction industries, the procurement of Silicone Oil might fall in the coming months.

According to ChemAnalyst, Global Silicone Oil prices are likely to follow an uptrend due to the growing demand from the downstream automotive and cosmetic industries. At the same time, feedstock Silicon metal prices may increase, which might impact the prices of Silicone Oil.