European Silicone Oil Prices Maintain Bullish Trend in September 2023 Amidst Economic Slowdown

Silicone Oil prices continued their bullish trend in major European powerhouses in the month of September amidst a global economic slowdown and recession. Multiple factors have led to maintaining the streak, including high energy costs, inflationary pressure, import restrictions, and limited demand. Feedstock prices of Silicone Oil continue their bullish trend globally while the downstream product remained bearish in North America and stable across the Asia Pacific. Silicone Oil is a commercial product used for the lubrication of light-duty and heavy-duty machines and automobile heat transfer fluid in electrical industries. It has recently gained market share in the electronics and semiconductor industries.

Prices across Europe continued their bullish trend despite weak demand. Silicone Oil (Sc-85%) 100 cst FOB Germany was assessed at around USD 3530/MT in September. Prices of European Silicone Oil continue to stay inflated in the global market due to high energy costs as Natural gas prices at TTF Dutch touched Euro 40/MWh in the given month, which is still higher than the energy prices in North America and Asia Pacific. Demand for Silicone Oil showed marginal improvement but remained relatively weak due to negative consumer sentiment. Raw material prices also turned bullish in the month, and severe supply disruptions were observed in procuring silicon. Major European producers revealed that Chinese suppliers had reduced the European supply, forcing Europe to procure from diverse sources, including Australia, Africa, etc., further increasing their procurement cost. Europe’s Silicone Oil demand is largely through the semiconductor industry along with EV sales. Though certain ‘green shoots’ are visible in Europe with inflation going down and rising new orders, many participants argue that the ‘high base’ effect has led to a lower inflation recording in the given month. One major factor highlighted by multiple players for disruption in the supply is the application of the ‘border tax,’ which the EU is implementing across its import destinations to facilitate climate-friendly transition. On inquiries with European suppliers, Silicone Oil imports from China have declined significantly, as reflected in the falling freight charges. Europe’s change in policy is further going to disrupt the market significantly as one of the largest suppliers and consumers of Silicone Oil, China, is going to face significant challenges in the coming months.

Prices in North America showed a bearish trend despite improvement in demand for Silicone Oil from the major markets like Mexico, etc. Destocking of Silicone Oil is observed as manufacturers are receiving good orders for lower prices from their traditional markets in Mexico. Mexico continues to be the largest importer of US Silicone Oil. As multiple strikes across the US have forced the major car manufacturers to shift their bases to Mexico, demand for Silicone Oil from Mexico continues to rise, one market player asserted. Imports from China and Transpacific, Europe, and Transatlantic remained weak, while the US largely imported significant volumes from Canada, Brazil, Mexico, and the Americas. Asian markets continue to have stable pricing despite rising raw materials prices and demand from China. Chinese markets are showing positive sentiments with the stimulus injected into the economy, with industrial output showing expansion sales volume rising despite rising energy and materials costs. Inquiries with Chinese market participants revealed China’s strategy of aggressively procuring Silicone Oil for its semiconductor and electrical industries and monopolizing the global market. With Europe buying less from China, the oversupply is being utilized by China in the domestic market with the stimulus given by the government to trap the major semiconductor market share once again. China’s exports of Silicone Oil to major partners registered a decline in the Asia Pacific region.

ChemAnalyst’s internal studies testify that demand for Silicone Oil prices in Europe is expected to show a mixed trend in the coming months as aggressive procuring strategies for the winter will put down the demand for a few months. A similar trend is expected across North America and Asia Pacific as the global economy is expected to slow down during the winter, with prices of Silicone Oil declining globally. Additionally, major raw materials are on the deflating path in Europe as energy prices continue to decline and the older inventories are getting cleared.