1. China has become the world's first producer and producer of organic silicon.


In the early days of the founding of the People's Republic of China, in order to meet the needs of the development of the national defense and military industry in the face of strict technical blockade, China began research and industrial production of silicone products in 1951, and initially mastered the synthesis of methyl sheets in stirred beds in the late 1950s. Body technology. Since the end of the 1950s, China's organic silicon industry has continued to improve the process of the agitated bed while developing the fluidized bed process. After more than ten years of exploration and practice, the company successfully established the first synthetic methyl monomer fluidized bed in China in 1971. The technical basis for the direct synthesis of methyl monomers by domestic fluidized bed. In 1995, the former Ministry of Chemical Industry built the first domestic 10,000-ton production unit using a fluidized bed process to synthesize methyl monomer at the Jiangxi Xinghuo Chemical Plant, which has brought China's organic silicon production capacity to a new level. In 1997, the total output of methyl monomer in China exceeded 10,000 tons for the first time. In 2003, it exceeded 100,000 tons for the first time.


In the 21st century, as domestic enterprises continue to improve their processes, build and expand their installations, the production situation of organic silicon continues to improve. At the same time, the rapid development of China's national economy has become a strong driving force for the development of the organic silicon industry. The state has successively issued a series of policies to support the development of the industry, and China's organic silicon industry has entered a period of vigorous development.


Chart 1: The development of China's silicone industry


According to SAGSI statistics, as of 2017, there are 13 methyl monomer manufacturers in China (including Dow-Wake Zhangjiagang), with a total polysilicon production capacity of 1.376 million tons/year (in production capacity of 1.268 million tons/year). The output was 1.021 million tons, up 3.61% and 13.44% respectively. The average annual compound growth rate from 2007 to 2017 was 16.45% and 21.14% respectively. The industry is developing rapidly. According to SAGSI, the total production capacity of polysilicon in China will reach 1.85 million tons/year in 2022, and the output will reach 1.5 million tons. The average annual growth rate during the period of 2017-2022 will be 6.10% and 8.10% respectively.


From 2008 to 2010, China's new silicone silicon project expanded rapidly, and the production capacity of polysiloxanes exploded. In addition, the gap between domestic and foreign companies' technology levels and foreign countries, resulting in a significant decline in industry capacity utilization during the period. Since then, domestic production capacity has entered a stage of moderate expansion. With the gradual digestion of excess capacity, industrial technology advancement and the improvement of enterprise process management level, the industry capacity utilization rate has continued to rise. As of 2017, China's polysilicon capacity utilization rate reached 74.20%, an increase of 6.43 percentage points compared with 2016, the highest level in nearly a decade. It is estimated that by 2022, the utilization rate of polysiloxane capacity in China will further increase to 81.08%.


Chart 2: China's polysiloxane production and forecast in 2007-2022 (unit: 10,000 tons / year, tons, %)


According to SAGSI's statistics, in 2017, China's main polysiloxane products, silicone rubber, silicone oil, silicone resin and other production (unpurified) were 1.215 million tons, 288,000 tons and 45,000 tons respectively.


Second, China has become one of the major regions for the growth of demand for organic silicon in the world.


From the demand side, in the past ten years, China's demand for silicone products has been relatively strong, and demand has maintained rapid growth. According to SAGSI statistics, in 2017, China's apparent consumption of polysiloxane (yield + net imports) reached 972,000 tons, an increase of 16.27% year-on-year, and the compound growth rate in 2007-2017 reached 12.18%. With the gradual advancement of China's economic transformation, the rapid increase in the income level of residents, and the steady implementation of the “Made in China 2025” and “One Belt, One Road” national strategy, SAGSI expects that polysiloxane consumption will continue to grow at a medium and high speed, 2017-2022 During the year, the average annual growth rate was 8.10%, and by 2022, the consumption reached 1.435 million tons.


Figure 3: China's polysiloxane consumption and forecast in 2007-2022 (unit: 10,000 tons, %)


Polysiloxane products are mainly classified into silicone rubber, silicone oil and silicone resin. In 2017, the consumption of polysiloxane in China was about 972,000 tons, of which the proportion of polysiloxanes consumed in the fields of silicone rubber, silicone oil and silicone was 64.2%, 29.6% and 3.6%.


Chart 4: 2017 China Polysiloxane Downstream Consumption Structure (Fold) (Unit: %)


Statistics show that per capita organic silicon consumption is basically proportional to per capita GDP, and that the growth of organic silicon demand in low-income countries is more flexible for income growth. At present, the consumption of organic silicon per capita in emerging market countries such as China is less than 1kg, while that in developed countries and regions such as Western Europe, North America, Japan and South Korea is close to 2kg. In the future, with the development of the economy, the demand for organic silicon in emerging market countries still has huge growth potential. The Asian market represented by China, India, etc. has a large population base and low per capita consumption, and will become the world's major silicone demand in the future. Growth area.


Exhibit 5: Lower Per Capita GDP Emerging Countries Have Great Consumption Potential


Third, China's exports of organic silicon have exceeded the amount of imports


Before 2008, China's organic silicon market demand grew rapidly, and its products mainly depended on imports. Since then, with the rapid expansion of domestic production capacity, domestic organic silicon technology has gradually matured, domestic quality has been continuously upgraded, and the localization of organic silicon has been rapidly advanced. The import volume of organic silicon has continued to decline, and the import substitution effect has been remarkable. At the same time, as the world's production capacity shifts to China, local advantageous enterprises have gradually expanded into overseas markets, and China's exports of organic silicon continue to grow rapidly.


According to statistics from China Customs, the export volume of polysiloxanes in China's primary shape has increased from 33,900 tons in 2008 to 2,134 thousand tons in 2017, with an average annual compound growth rate of 22.70%. In the same period, the import volume decreased from 216,800 tons to 121,100 tons, a decrease of 44.11%. In 2014, China's primary shape polysiloxane achieved net export for the first time. In 2017, net exports reached 92,300 tons, a substantial increase of 257.21% year-on-year.


Figure 6: China's primary shape of polysiloxane import and export in 2000-2017 (unit: 10,000 tons)


Note: The primary shape of polysiloxane (customs tax number 39100000) mainly includes silicone products such as DMC, D4, silicone rubber, silicone oil, etc. The trade volume of silicone under this tax code accounts for more than 90% of the total.


In 2017, China exported about 21.34 million tons of primary-shaped polysiloxanes, a sharp increase of 53.65% compared with 2016. This was mainly due to the sharp increase in demand brought about by the accelerated recovery of overseas economy, as well as the stagnation of foreign capacity growth and the permanent production of some production equipment. Insufficient overseas supply due to sexual shutdown.


It is expected that in the future, the net export volume of silicone products in China will maintain a relatively fast growth trend, which is mainly due to the following factors: First, the global silicone market continues to expand, expected 2017-2022 The annual growth rate will be 5.85% per year. Second, affected by raw materials, costs and market factors, overseas production capacity growth is slow, and global production capacity is shifting to China. Third, China's silicone industry has gradually taken a dominant position in global competition.


Fourth, power and new energy applications will account for the proportion of organic silicon terminal consumption will increase


Silicone is a kind of high-performance new material with excellent performance, various forms and wide application. With the development of national economy and the improvement of people's living standards, silicone products show their superior performance and play a role in more and more fields. , gradually replace the traditional materials, the scope of application continues to expand. Since the 1950s, China's organic silicon industry has not only supported the development of strategic emerging industries such as defense industry, information technology, high-end equipment manufacturing, new energy, biomedicine, but also China's construction, electrical appliances, textiles, and individuals. Silicone is used in the fields of nursing, daily necessities, transportation, etc., which plays a positive role in promoting the technological advancement and upgrading of traditional industries. Especially in the context of the increasing energy crisis in the world, as a new chemical material for non-oil routes, organic silicon has increasingly shown its strong vitality and broad development prospects.


In 2017, the apparent consumption of polysiloxanes in China was 972,000 tons, of which the largest proportion of consumption was in the fields of construction, electronic appliances, electric power and new energy, medical and personal care. It is expected that in the next five years, in the downstream applications of many silicones, the demand for traditional fields such as construction, power, electrical appliances, textiles, and personal care will grow steadily; the demand for new energy, medical, electronics, and daily necessities will increase. .


Figure 7: China Polysiloxane Terminal Consumption Structure (Unit: %)


During the 13th Five-Year Plan period, the state will continue to vigorously promote the construction of major projects such as “Ultra High Pressure”, “Western Power Transmission to the East” and “Smart Grid”. In addition, the state has also launched a new round of rural network transformation. During the 13th Five-Year Plan period, the new energy industry has a strong support policy, and the new plans for light, wind and nuclear power are magnificent. There are also feasible plans for the construction of new energy vehicles and storage and charging facilities. These will significantly boost the demand for silicone products.


5. Since 2016, the supply and demand pattern has improved significantly, and product prices have rebounded.


Since the second half of 2016, the price of silicone products has increased significantly, and the profitability of upstream monomer companies has increased significantly, which is mainly due to the substantial improvement in the supply and demand pattern of the industry. (China's silicone industry usually reflects the change in the price of silicone products by DMC price)


First of all, from the demand side, after long-term development, China's silicone industry technology level has been significantly improved, production costs have fallen sharply, product categories continue to be enriched, product quality and grades continue to improve, downstream applications rapidly expand, high-performance silicone products in The application range of strategic emerging industries such as new materials, information technology, biomedicine, and new energy sources continues to expand, and the demand for organic silicon products in China is growing rapidly. In 2016 and 2017, the apparent growth rate of China's apparent consumption of polysiloxanes was 9.57% and 16.27%, respectively. At the same time, benefiting from the global competitiveness of China's silicone products and the accelerated growth of the world economy, the demand for silicones in the overseas market is strong. In 2017, the export volume of primary forms of polysiloxanes reached 21.34 million tons, a substantial increase of 53.65%.


Secondly, from the perspective of the supply side, the growth of overseas monomer production capacity has basically stagnated in the past decade, and the domestic production capacity growth rate has also been significantly lower than the growth rate of consumer demand since 2011. The excess capacity in the previous period has been gradually digested, and the utilization rate of the industry has been continuously improved. . With the improvement of industry technology, capital and other barriers, China's organic silicon monomer production has no new entrants since 2011, and the increase in production capacity mainly comes from the expansion of leading enterprises. As of 2017, the capacity concentration of the top five domestic enterprises has increased to about 60%, and the industry competition pattern has been greatly optimized. At the same time, due to the structural reform of the supply side of the state and the increasingly strict environmental protection policy, the new capacity of organic silicon began to be limited, and the production of technically backward enterprises stopped production and production increased. The supply of organic silicon in China tends to be tight.


Thirdly, from the perspective of industrial structure, with the improvement of domestic monomer production technology and tend to be stable, large-scale monomer enterprises are no longer satisfied with the production and supply of simple intermediates, and they have begun to extend the industrial chain to the downstream deep processing field to obtain Greater profit margins and growth prospects. With the substantial increase in the proportion of self-use of domestic monomer companies (mainly DMC), the shortage of intermediate products such as DMC in the market has appeared, which has pushed the price of DMC to further increase.


Finally, from the cost side, affected by structural reforms on the supply side and environmental protection policies, the prices of organosilicon upstream materials such as silicon metal, methyl chloride, methanol and energy generally rose, driving the price of organic silicon products up.


Figure 8: Trends in tax prices in China's silicone market since 2004 (unit: yuan / ton)


Sixth, high-end silicone products are still heavily imported, and the policy guides the transformation and upgrading of the industry.


Since 2008, with the rapid expansion of China's silicone production capacity and enterprise technology upgrades, China's low-end silicone products have gradually achieved import substitution, but high-end products still rely heavily on imports. From 2008 to 2017, China's primary shape of polysiloxane imports decreased from 216,800 tons to 121,100 tons, while the average price of imported products increased from 3,634 dollars per ton to 6,249 dollars per ton in the same period. It is on an upward trend.


In 2008-2017, China's primary shape of polysiloxane exports increased from 33,900 tons to 21.34 million tons, but the average export price has remained at 3,000-3,500 US dollars / ton, mainly low-end intermediate products and base polymers. Export. With the guidance of national industrial policies, the promotion of downstream consumer demand, and the improvement of R&D capabilities and technical level of domestic production enterprises, there is still much room for development of high-end organic silicon products in China in the future.


Figure 9: Average unit price of China's primary shape polysiloxane import and export (unit: USD/ton)


In view of the fact that organic silicon materials are high-performance new materials and have a high degree of industrial relevance, they are important for promoting the upgrading of related industries and high-tech development. Silicone materials are not only an important part of the national strategic emerging industry new materials industry, but also other strategic emerging. Indispensable supporting materials for the industry. Silicone materials have always been a new material encouraged by the state to develop, and a series of policies have been introduced to support and encourage them.


With the development and progress of China's organic silicon industry, the state's encouragement policy for the silicone industry has gradually shifted from monomer production to deep processing of silicone products, development of new silicone products, expansion of new application areas, and improvement of comprehensive utilization levels. A policy to limit and eliminate backward, high-energy monomer production capacity.


Figure 10: Major industrial policies of China's silicone industry


The above data and analysis are all from the Prospective Industry Research Institute “China's Silicone Industry Market Demand Forecast and Investment Strategy Planning Analysis Report”.