Silicone Supply–Demand Turning Point Has Arrived-Iota

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News > Dynamic industry > Silicone Supply–Demand Turning Point Has Arrived

Silicone Supply–Demand Turning Point Has Arrived

As of December 2025, the silicone market is undergoing a critical transition—from prolonged oversupply toward a tight balance, and in some periods even structural tightness. This shift is mainly driven by the following factors:

I. Supply Side: Capacity Expansion Slows Sharply, Proactive Production Cuts Become the Norm

Significant reduction in new capacity
In 2025, national新增 DMC capacity totals only about 100,000 tons (such as the Inner Mongolia project of Xingfa Group), far below the average annual additions of more than 300,000 tons seen during 2022–2024. Leading companies such as Hoshine Silicon Industry and Dongyue Silicone Materials have clearly stated that they will “no longer expand capacity blindly.”

Industry-wide coordinated output controls
Since November 2025, major producers have jointly implemented “anti-involution” production cuts. Overall operating rates have fallen from above 80% to around 75%, while maintenance-related capacity outages have reached as high as 20% in certain months, effectively easing supply pressure.

Stronger cost support
Rising electricity prices during the southwest dry season, a rebound in industrial silicon prices to RMB 9,800–10,200 per ton, and increasing environmental compliance costs have made low-cost production unsustainable. As a result, outdated and inefficient smaller plants continue to exit the market.

II. Demand Side: Weak Traditional Segments vs. High-Growth Emerging Sectors, with Clear Structural Optimization

Sluggish traditional construction demand
Real estate–related demand, accounting for approximately 30% of end consumption, remains at a low level.

Strong momentum from new energy and electronics

Demand for photovoltaic sealants has surged year on year, with PV-grade DMC procurement up more than 50% in 2025;
Silicone consumption per new energy vehicle is about seven times that of conventional internal combustion vehicles, driving rapid growth in demand for battery sealing adhesives and electronic potting compounds;
High-end applications in electronics and electrical equipment (chip packaging, 5G thermal interface materials), as well as healthcare (artificial organs, medical aesthetics), continue to expand rapidly.

Exports act as a balancing valve
In the first eight months of 2025, polysiloxane exports reached 373,000 tons, up 1.5% year on year, with particularly strong growth to Belt and Road countries.

III. Supply–Demand Outlook: Dynamic Balance Expected in 2026–2027

Short term (Q4 2025–H1 2026)
With production cuts combined with peak-season demand release, the market is expected to remain in a tight balance, and the DMC price support range has moved up to RMB 11,000–12,000 per ton.

Mid term (2026–2027)
As new capacity additions nearly come to a halt (five-year capacity CAGR falling to 2.17%), while demand in emerging application areas is expected to grow at a 5–7% CAGR, supply–demand gaps may gradually emerge.

Long term
With higher industry concentration (CR5 exceeding 60%) and rising technical barriers, the silicone industry is set to transition from a bulk chemical model toward functional advanced materials, resulting in more stable and sustainable profitability.

Conclusion

The silicone market is shifting from an “capacity-driven” oversupply cycle to a new equilibrium defined by upgraded demand structure and more rational supply behavior. From 2026 onward, the industry is likely to enter a new upcycle characterized by stable volumes, rising prices, and profit recovery.

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