Versatile silicone polymers essential to numerous applications in construction, automotive, cosmetics and medical/pharmaceutical industries
Thursday, April 10, 2014 7:00 am EDT
"As economies improve and consumers in developing countries like China expand their disposable incomes"
A robust demand for silicones in China, combined with an improving economy there, is driving market growth for these versatile polymers, which are increasingly vital to the construction, automotive, cosmetics and medical/pharmaceutical industries, says a new global market research report released by IHS (NYSE: IHS), the leading global source of critical information and insight.
The IHS Chemical report goes on to say, however, that aggressive capacity expansion of silicone production by China since 2009 is generating significant global excess capacity that is impacting profitability and growth for silicones producers worldwide, and is driving less profitable producers or operations to rationalize their production.
China is expected to build additional capacity, equivalent to nearly 20 percent of the 2012 global demand, through 2016. “That excess Chinese capacity threatens to destabilize the global silicones market,” said Aida Jebens, principal author of the IHS Chemical report and a specialty chemical analyst at IHS. “Less profitable producers are at risk of rationalization and under-utilization, and excess capacity is going to cause prices to fall.”
According to the IHS Chemical Economics Handbook: Silicones report, global demand for silicones will increase from 1.7 million metric tons (MMT) in 2012, to 2.4 MTT in 2018, which represents an average annual growth rate of nearly 6 percent during the study period of 2012 to 2018.
Now the largest producer of silicones in the world, China owns nearly 40 percent of global silicone-production capacity. This feat was made possible by the start-up of several world-scale silicones manufacturing plants built since the mid-2000s, noted the IHS report. Some of these plants are joint ventures with foreign companies such as Dow Corning (based in the U.S.), the global leader in silicone production, and Wacker Chemie (based in Germany).
According to IHS, further capacity additions are scheduled to come on stream in China through 2016. If all of these projects come on stream, China's share of the global capacity will rise to 50 percent by 2016. In comparison, no significant capacity additions occurred in the other regions in the last five years and none is expected through 2016.
Silicones, or polysiloxanes, are versatile polymers of silicon and oxygen with carbon, hydrogen, or occasionally, other elements. Silicones can be classified as fluids, elastomers or resins. Silicones possess physical and chemical properties that allow their use in a multitude of diverse applications from personal care items for our skin and hair to industrial applications such as automotive lubricants and polishes, as well as sealants and protective coatings for construction. Medical applications for silicones are also quite diverse —from artificial tears, to burn treatment and wound care, as coatings for tablets and capsules, for implants, and in the treatment of blood handling equipment.
“During the next four years,” Jebens said, “we expect global demand growth for silicone fluids will grow about 4 percent, driven primarily by the cosmetics, toiletries, and medicinal/pharmaceutical applications. For silicone elastomers, which are critical to the growing construction and automotive industries, we foresee even stronger demand growth at 7 percent annually, whereas for silicone resins, which are also tied to the construction industry, we see more modest annual growth of 3 percent during the study period.”
With the increased domestic supply of silicones, China’s consumption of silicones has grown very rapidly in a short period of time — consumption rates of the product increased 25 percent annually during the 10-year period of 2002 to 2012, enabling China to surpass the traditional demand powerhouses of the U.S. and Western Europe!
In 2002, China accounted for only 7 percent of global consumption, compared to the U.S. at 30 percent, and Western Europe at 34 percent. In fact, IHS report said, it was China’s buoyant demand that kept the global silicones market from shrinking significantly during the great recession of 2008 to 2009. In 2012, China’s share of the global market rose to 36 percent, while those of the U.S. and Western Europe both declined to 17 percent and 23 percent, respectively.
“As economies improve and consumers in developing countries like China expand their disposable incomes,” Jebens said, “the demand for personal care items and automobiles, which are produced using silicone components, increase. Likewise, improving economic conditions drive more construction, which is heavily dependent upon silicone-based materials.”
Added Jebens, “Going forward, we expect China’s projected consumption growth for silicones to slow somewhat, although it will still grow at close to 10 percent per year, pulling the overall global growth rate close to 6 percent per year during the 2012 to 2018 period. Despite this anticipated slowing in domestic demand for China, the country’s impact on the global silicones market cannot be minimized. China is the most dominant player in the market, and any major shifts in either Chinese demand or production capacity will have significant implications for the global silicones market. The sheer volume of excess capacity being added to the market by China is already impacting the profitability and performance of global producers, and more capacity has yet to be added.”
IHS expects above-average growth may also occur in Central and Eastern Europe, Central and South America, and the Middle East and Africa, although consumption levels in these regions are still fairly low. Consumption in North America and Western Europe is expected to increase at 3 percent to 3.5 percent per year, while Japan’s market will grow only slightly during the 2012 to 2018 period.
Besides Dow Corning and Wacker Chemie, the largest manufacturers of silicones, in terms of capacity, are Momentive Performance Materials (based in the U.S.), Shin-Etsu Chemical (Japan), and Bluestar Silicones (France).
The IHS Chemical Economics Handbook reports cover global chemical business and market analysis for more than 300 industrial chemicals, with in-depth insights on market growth, supply/demand, process, prices and trade in the global chemical markets for five-year periods. For more information on the IHS Chemical Economics Handbook: Silicones report, please contact email@example.com. To speak with Aida Jebens, the study’s lead author, please contact firstname.lastname@example.org, or email@example.com.
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