SDIC Securities: Silicone industry collaborates to cut production, reverse supply and demand exceed expectations
The Zhitong Finance App learned that SDIC Securities released a research report saying that since November 2025, three consecutive silicone industry collaboration meetings have been held to reach a consensus on production reduction plans and supervision mechanisms, driving silicone prices to rapidly rebound from a low of 11,000 yuan/ton to 13,700 yuan/ton on December 26. If this collaborative production reduction is strictly implemented, leading manufacturers may benefit from the double boost of short-term silicone price increases and structural changes in the medium- to long-term supply pattern. In addition, along with the increase in industry concentration and the recent rise in “reverse internal volume”, there are opportunities for structural optimization on the silicone supply side. The industry is expected to experience supply and demand gaps of -1.9/-29.4/-184,000 tons in 2025-2027, respectively, and the supply and demand misalignment caused by the production expansion cycle is expected to be reversed.
The main views of SDIC Securities are as follows:
The foundation of the coordination mechanism is consolidated, and attention is paid to the rigidity of implementation of production cuts
The domestic silicone production capacity expansion cycle has gradually come to an end. In 2019-2024, China's silicone production capacity increased from 1,515,000 tons to 3.44 million tons, and the CAGR reached 17.8%. Although additional capacity plans such as Xinjiang Qiya and Yunnan Energy Investment are under construction, uncertainty at the specific implementation level may limit actual investment, and supply-side pressure is still expected to gradually ease. The concentration of production capacity in the industry continues to increase. CR4 may reach 54.7% in 2025, forming a “one super many strong” pattern, laying the foundation for “anti-internal volume” collaboration.
Since November 2025, the silicone industry has held three consecutive meetings to reach consensus on production reduction plans and supervision mechanisms, driving silicone prices to rapidly rebound from a low of 11,000 yuan/ton to 13,700 yuan/ton on December 26. SDIC Securities believes that if this collaborative production reduction is strictly implemented, it is expected not only to accelerate the phasing out of old production capacity in the early stages, but also to actively withdraw marginal small production capacity lacking scale effects and raw material support due to economic considerations. Subsequent industry starts and production levels may converge towards a healthier and more stable range. Leading manufacturers may benefit from both short-term silicone price increases and structural changes in the medium- to long-term supply pattern.
Furthermore, foreign companies may continue to focus their strategic focus on developing downstream products. They have withdrawn or announced their withdrawal from more than 300,000 tons/year of silicone production capacity in the past five years, which is expected to strengthen China's dominant position in the upstream supply chain and further optimize the supply pattern.
The silicone demand structure continues to be optimized, and the trend of changing growth momentum is clear
Due to the physiological inertness, low surface tension, resistance to high and low temperatures, electrical insulation, and weather resistance of both inorganic materials and organic materials, silicone is widely used in building decoration, electronics, new electric energy, textile manufacturing, medical care, automobile transportation, industrial additives, functional additives, etc.
China Investment Securities pointed out that although early silicone applications were mostly concentrated in the middle and low end markets, it has been observed that the silicone consumption structure is undergoing changes. The share of the traditional construction sector has declined significantly from 33.1% in 2021 to 25.2% in 2024, while demand in emerging sectors is increasing faster than expected:
① From January to November 2025, photovoltaic cell production was 636.9 GW, a significant increase of 30.0% over the previous year. Assuming 1,200 tons of silicone per GW, the annual theory is expected to drive an increase of 140,000 tons in demand for photovoltaic sealants; ② From January to November 2025, the production of new energy vehicles exceeded 12 million units, assuming 18 kg of silicone used in bicycles, the annual theory is expected to drive an increase of 66,000 tons of related silicone consumption; ③ Using 25 kg of single composite insulators and 50% silicone rubber content, the field of composite insulators in power systems is also expected to contribute 1.9 10,000 tons of new silicone demand.
China Investment Securities believes that from a comprehensive perspective, the silicone supply and demand pattern has reached an inflection point under supply-side “anti-internal volume” collaboration and demand resonance in emerging fields. The industry is expected to experience supply and demand gaps of -1.9/-29.4/-184,000 tons in 2025-2027, respectively, and the supply and demand mismatch caused by the production expansion cycle is expected to be reversed.
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