The price of the organic silicon industry chain has risen. The performance of companies such as Hesheng Silicon, Xinan, and Sanyou Chemical has risen, and the gross profit margin of enterprises with complete industrial chain is relatively high. In the case of high cost, companies have accelerated their expansion to high value-added downstream products.


Great performance


In the past year, the price of silicone DMC soared from 14,000 yuan/ton at the beginning of 2017 to 32,000 yuan/ton at the end of the year, a record high in a decade. The production capacity of silicone monomer-intermediate production capacity has been greatly benefited, and the related companies' net profit increased significantly in 2017.


The latest performance forecast shows that Xinan shares are expected to have a net profit of 512 million yuan to 551 million yuan in 2017, a year-on-year increase of about 6 times; Xingfa Group expects net profit to increase by about 2 times year-on-year; Hesheng Silicon Industry expects net profit to increase about 1 time year-on-year; Sanyou Chemical is expected to grow about 1.5 times.


Lu Yanqing, a researcher at the Prospective Industry Research Institute, said that the price increase of the silicone DMC market was mainly due to three reasons: due to environmental protection, some manufacturers stopped production and maintenance, and the operating rate was lower, resulting in tight supply; raw material prices rose, and methanol and silicon prices continued. Rising, pulling up the silicone DMC market; freight rates have helped to boost.


Many brokerages believe that the price of organic silicon will remain strong in 2018, and the price range of DMC is between 26,000 and 36,000 yuan/ton.


Lin Yang, chief analyst of Dongxing Securities Chemical Industry, said that the first new capacity is limited, and it will only be released after 2019. Secondly, the supply-side reform will reduce the small and medium-sized production capacity; third, the downstream demand will grow steadily; fourth, the cost will be promoted. The main cost of industrial silicon and methanol is coal, coal prices remain high, and the cost of silicones is upward.


At present, the silicone industry is highly concentrated. There are only 15 large-scale silicone manufacturing companies in the world and 10 in China. Among them, Hesheng Silicon, Sanyou Chemical, Xin'an and Xingfa Group are among the top producers. Overall, the total domestic production capacity of organic silicon accounts for about half of the global total capacity.


Downstream price increase


As the price of DMC rises, downstream products of silicones have raised prices. US Momentive recently announced the price increase announcement. Since March 15, the price of silicone sealant products has increased by 20%; from April 1st, the price of elastomer products has increased by at least 10%. In the domestic market, with the increase in the price of silicones, in 2017, Silicone Technology, which specializes in silicone sealant, raised its price slightly by 3 times, and each price increase did not exceed 10%.


Silicone downstream products mainly include silicone rubber, coupling agent, silicone oil and silicone resin. Among them, silicone rubber consumption accounts for about 70%. Silicone applications are scattered, involving industries such as construction, electronics, electrical equipment and new energy. According to the statistics of China Fluorosilicon Organic Materials Industry Association, according to the consumption of silicone intermediates, about 34% of the downstream demand for silicones comes from real estate, mainly used for decoration.


Li Song, secretary-general of Silicon Treasure Technology, told Chinese securities reporters that the price increase of the company's products is far below the increase in raw material prices and is currently at a break-even point. “The downstream of silicone sealant is mainly concentrated in the construction field. The downstream concentration is increasing and the bargaining power is enhanced. The number of midstream companies is as high as 1,000, which is highly competitive. The company took the lead in raising prices for some products in 2017, and the price increase is less than 10%, but lost some customers."


The performance report shows that Silicone Technology achieved operating income of 728 million yuan in 2017, an increase of 11.61% year-on-year; net profit was 52.205 million yuan, down 42.63% year-on-year.


The industry believes that raw material prices have risen, business pressures have increased, and profits have fallen. Increasing the price of a product may result in a loss of sales due to the loss of customers. In this context, SMEs with weaker competitiveness are in a dilemma.


Li Song said that the status quo of the silicone sealant industry has forced the company to transform and upgrade, and will develop towards higher profit deep processing products, aiming at high precision. “The company reshapes the industrial rubber system and establishes a special business unit, which will increase the sales of industrial rubber.”


Expand the industrial chain


“The overseas market has high added value of downstream products of organic silicon, and the raw material price increase is relatively smooth. The downstream deep processing technology gap in the domestic market is relatively large. At present, only some low value-added products can be made. In order to obtain more profit space, R&D investment should be added. Big." Guoqiang Securities chemical industry analyst Pu Qiang told China Securities Journal.


Judging from the gross profit margin of organic silicon listed companies, the more complete the industry chain, the higher the gross profit margin of enterprises. In recent years, the leading companies in the upstream of silicones such as Hesheng Silicon, Xin'an and Sanyou Chemical have accelerated the expansion of the industrial chain and have extended to the downstream deep processing.


Hesheng Silicon's business covers upstream silicon and methyl chloride, midstream silicone monomer and silicone intermediates, and downstream deep processing products. The main products include silicon-based new materials such as industrial silicon and silicone. It is the most complete and production chain in the country. The largest silicon-based new materials company.


According to the prospectus, Hesheng Silicon Industry intends to use about 1 billion yuan to raise funds for the construction of 100,000 tons of silicone intermediates and downstream deep processing projects. The company said that after the project is completed and fully completed, it will add 100,000 tons/year of siloxane capacity, correspondingly to produce 3,509 tons/year of silicone oil capacity, 42,200 tons/year of 110 raw rubber production capacity, and 50,600 tons/ The annual capacity of 107 rubber and the production capacity of 111,000 tons/year of rubber compound.


Xin'an shares a complete industrial chain of metal silicon to silicone terminal products. The industry expects its organic monomer production capacity to reach 320,000 tons per year in 2018. With the expansion of the industrial chain, the gross profit margin of Xin'an shares has gradually increased. The 2017 results forecast shows that the gross profit margin increased by about 4.26% year-on-year, and the gross profit increased by about 310 million yuan. For downstream deep processing products, the production capacity of high temperature rubber, room temperature glue and silicone oil is 35,000 tons/year, 25,000 tons/year and 15,000 tons/year, respectively.


Sanyou Chemical is mainly engaged in the soda ash and chemical fiber industries. Silicone is its subsidiary industry and has a capacity of 200,000 tons/year of organic silicon monomer. Among them, 47% of silicones are used by themselves, and external sales account for 53%. In 2016, the downstream capacity of Sanyou Chemical's organic silicon industry chain was about 24,700 tons. Among them, the room temperature glue is 14,700 tons, and the high temperature glue is 10,100 tons.


“The operating rate of the company's silicone project is basically full. In addition, the company has been transforming the high-end products of silicone deep processing, from monomer to ring, to downstream products, and the whole industry chain. Next, we will promote silicone oil and silicone rubber. And other downstream industry development." Sanyou Chemical related people told the China Securities Journal reporter.