Driven by demand from both the photovoltaic and new energy sectors, the silicone industry is entering a window of opportunity for a valuation rebound.
2026-06-23
Currently, the silicone industry is experiencing a phase of favorable market conditions driven by multiple positive factors. Driven by a combination of supply contraction resulting from coordinated industry-wide emissions reductions, sustained price recovery, the consolidation of overseas production capacity, and rapid expansion of demand from emerging downstream sectors, the industry’s profitability continues to improve, and the sector has entered a significant window of valuation recovery.
Supply Continues to Tighten, Leading to a Substantial Recovery in Industry Profitability
Recently, the silicone industry has uniformly implemented phased, coordinated production cuts. From June to August, the entire industry reduced output by 40%, bringing the industry-wide operating rate down to 60%. At the same time, DMC market prices were standardized to strictly control low-price, disorderly competition, effectively alleviating inventory pressure. Meanwhile, driven by the implementation of the EU’s new REACH environmental regulations and high energy costs in Europe, Dow plans to shut down 150,000 metric tons of silicone monomer production capacity, while Wacker is simultaneously scaling back production. This long-term contraction in overseas supply benefits domestic companies by facilitating export substitution.
Against the backdrop of a tight supply-demand balance, silicone prices have continued to rebound from their lows. Monitoring data shows that DMC prices have rebounded by more than 30% from their October 2025 low, and in the first quarter of 2026, net profits at leading industry companies grew by as much as 400% year-over-year, completely reversing the previous trend of losses.
Rapid Expansion of Emerging Downstream Demand Opens Up Long-Term Growth Potential
As an indispensable core new material for the photovoltaic, new energy vehicle, and electronics industries, the consumption structure of silicones is accelerating its shift toward emerging sectors:
New Energy Vehicle Sector: The silicone consumption per new energy vehicle is eight times that of a traditional fuel-powered vehicle. The use of silicone for thermal management, sealing, and flame retardancy in power batteries continues to rise with the widespread adoption of CTP and CTC battery processes. Automakers are securing long-term contracts for silicone raw materials in advance to ensure supply chain stability.
Solar sector: Demand for sealants and potting compounds for solar modules has surged by 50% year-over-year. The global expansion of solar installations continues to drive procurement of silicon-based auxiliary materials, leading to a steady rise in capacity utilization rates among solar auxiliary material manufacturers.
New materials for electronic packaging: Demand for high-thermal-conductivity silicone potting materials required for AI servers and power semiconductors is rapidly increasing. The value added by high-end electronic silicone rubber continues to rise, driving revenue growth for silicone deep-processing enterprises.
Related Industries Benefit Significantly, Entering a Phase of Strong Performance
Driven by the upswing in the silicone sector, industries such as PV auxiliary materials, new energy vehicle components, and new materials for electronic packaging are all reaping the benefits of growth. Currently, the overall valuation of the silicone sector remains at historical lows. Fueled by both expectations of price increases and a recovery in earnings, this cyclical sector is poised to experience a dual opportunity of simultaneous earnings and valuation recovery.
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