Silicones prices rise due to higher production costs and amid higher demand including from EVs makers
Some of the top global silicones manufacturers will increase prices in May to reflect a combination of rising costs including that for the silica metal raw material as well as energy, with strong demand from many areas, including EVs manufacturers.
Wacker Chemie, one of the leading silicones products producers, reported on March 15 that the company ended 2021 with new all-time highs for sales, earnings and net cash flow mainly because of “higher selling prices” and volume growth across every business.
Analysts anticipate 6% annual market growth ahead for silicones.
Silicones products include fluids, emulsions, resins, elastomers, sealants, silanes, silane-terminated polymers and pyrogenic silica.
Applications range from automotive to engineering and construction, and from cosmetics and paper to textiles.
Shin-Etsu raises prices
Shin-Etsu said on April 11 that it will increase sales prices of silicone products by 10% starting May 1. Silicone products are one of its main business segments both in its home country of Japan and globally.
“In the latter half of 2021, silicon metal, the main raw material of silicones, faced a tightening of supply and demand globally due to such effects as electricity regulations in the main production area of China,” Shin-Etsu said.
At “peak time, the price of silicon metal sharply rose by close to six times of the price prior to the outbreak of the Covid 19 pandemic. Even today, the price of silicon metal is continuing to increase,” it added.
“The price of silicon metal continues to be at a level of over three times that of the price prior to the Covid-19 pandemic,” Shin-Etsu said.
In addition, prices for methanol, another raw material, remain high, and there has been a sharp rise in energy costs related to manufacturing, such as natural gas, Shin-Etsu added.
Logistics costs and secondary materials prices are rising due to disruptions in global logistics and to a sharp rise in energy prices.
Wacker raises prices
Wacker Silicones announced in October that silicones were going to see increased prices “on average by 30% or more.” Both in 2021 and this year prices of products in its portfolio increased.
Wacker increased global prices for silicones between 10% and 20% in April 2021. Wacker Silicones brings about 50% of the entire group sales.
Wacker said on April 6 that starting on May 1 prices will increase for dispersions, resins and dispersible polymer powders due to rising costs for raw materials, logistics and energy.
Germany-based Wacker started operations in the U.S. in 1965. It runs six North American sites. The Americas account for 18% of its revenue. Its silicones, polysilicon, and polymers units are based in Adrian, Michigan, its oldest U.S. site.
Silicones boost Dow´s earnings
Dow´s president and chief financial officer, Howard Ungerleider, said on March 17 while discussing the January-March outlook that silicones helped to achieve first quarter earnings beyond projections.
“We're seeing strong demand, inclusive of March, across the entire enterprise, but two-thirds of that $200 million (projected earnings above first call consensus estimate) is in silicones,” Ungerleider said.
“Fundamentally, the biggest issue is we're seeing good fundamental solid underlying demand in mobility, in infrastructure, in packaging,” he added.
And silicones go into a significant number of applications “in a very diversified way,” he said.
“When you think about the trend to sustainable buildings, green buildings, you think about the trend to EVs, there is three to four times more silicone in an EV vehicle than in an internal combustion,” Ungerleider added.
6% annual growth
The silicone elastomer market may expand 6% annually to reach $7.3 billion in 2030, according to Allied Market Research. Rising demand from construction and electronics have fueled recent growth, it said.
Silicones elastomer offerings accounted for $6.9 billion in 2020, Allied Market said on April 14.
“Automobile manufacturers are demanding more silicone elastomer to reduce vehicle weight. However, the construction segment held the largest share globally in 2020, accounting for around one-fourth of the global silicone elastomer market,” Allied Market said.
Dow, ICM, KCC, Elkem, Mesgo, Reiss Manufacturing, Shin-Etsu and Wacker were listed by Allied Market as producers.
Rising demand
New aircraft demand should play a role in the future for silicones, ResearchAndMarkets said on March 22 in a press release about a market report covering silicone elastomers, fluids, resins and their applications in construction, transportation, and electronics.
“The electronics industry catering to automotive applications is witnessing the demand for a product with high thermal conductivity and well-managed volatility to achieve efficient heat dissipation,” according to the report.
“A recovery in demand for new commercial aircraft as the industry recovers as well as the demands for ships for freight may also help accelerate growth of the global silicones market,” it said.
Air travel was severely impacted by the Covid-19 pandemic with demand for products like jet fuel still lagging behind 2019 levels as of April 2022. Aircraft manufacturing, like vehicle manufacturing, creates strong demand for both petrochemical commodities and specialty resins.
“Autonomous vehicles, 5G capabilities, all require more silicones,” said on April 21 James Fitterling, CEO of Dow. He said markets for silicones are “growing substantially.”
“They're anything from new vulcanized products, lower viscosity fluids for personal care applications, all kinds of gels for EVs, electronics, mobile optics for automotive lighting. So think about the headlamps in a vehicle, not being polycarbonate anymore but being moldable optical silicone,” Fitterling said.
By Renzo Pipoli