Global Silicone Market Outlook to 2026: Supply-Demand Dynamics, Price Trends, and China's Capacity Impact
2026-01-06
As the global manufacturing sector undergoes profound restructuring and accelerates its green transition, silicones—as strategic new materials—are undergoing a pivotal shift from “capacity expansion” to “high-quality development.” By 2026, the industry's supply-demand balance, pricing mechanisms, and regional competitive landscape will exhibit new characteristics. This article systematically analyzes core trends in the global organosilicon market for 2026 based on the latest market data.
I. Eastward Shift in Capacity is Inevitable, with China Dominating Global Supply
Over the past five years, global organosilicon monomer capacity has continuously concentrated in China. By the end of 2025, China's organosilicon monomer capacity reached 3.7 million tons/year, accounting for 77.3% of global total capacity—an increase of nearly 20 percentage points compared to 2020. This trend persists—China's share is projected to rise to 84.7% by 2029.
Overseas, European and American companies are gradually exiting primary monomer production due to high energy costs and strategic shifts toward high-value-added deep processing. In 2026, Dow plans to shut down part of its UK silicone monomer facilities, while Momentive previously exited 305,000 tons of capacity. Apart from a few companies like Shin-Etsu Chemical maintaining local supply, nearly all new global capacity additions originate from China.
Notably, no new domestic capacity is likely to come online in 2026. Driven by prolonged industry losses, cautious capital expenditures, and policy guidance, the expansion cycle has effectively concluded. Only a few planned projects in regions like Inner Mongolia may materialize by 2027.
II. Marginal Improvement in Supply-Demand Dynamics, but Short-Term Pressures Persist
Despite slowing capacity expansion, demand has yet to fully recover. In the first three quarters of 2025, China's consumption of silicone intermediates grew by only 5.5% year-on-year, lagging behind supply growth. Weak demand in traditional sectors like construction and textiles, coupled with the absence of the usual peak season demand during the “Golden September and Silver October” period, has led to high inventory accumulation—DMC factory inventories reached 73,200 metric tons in August 2025, a sharp 54.75% year-on-year increase.
However, structural bright spots are emerging:
New Energy Vehicles: Per-vehicle silicone usage is approximately seven times that of fuel-powered vehicles, with related consumption growing 44.2% year-on-year in 2025;
Photovoltaics: Robust demand for module encapsulation adhesives drove consumption growth of 19.4% year-on-year;
Electronics & Appliances: Benefiting from AI, 5G, and chip packaging upgrades, demand increased by 16.7%.
These emerging sectors are gradually offsetting the drag from traditional industries. Industry institutions forecast that the supply-demand gap will shift from negative to positive in 2026–2027. The 2026 supply-demand difference is projected to be **-112,000 tons**, narrowing further from 2025 levels as the rebalancing process accelerates.
III. Prices Bottom Out Amid Volatility, Cost Support Strengthens
In 2025, DMC (dimethyl cyclosiloxane) prices plummeted to ¥10,200/ton, hitting a decade-low. By Q4, prices stabilized within the ¥10,500–11,500/ton range, supported by low operating rates (around 75%), voluntary production cuts by enterprises, and firm raw material silicon metal prices.
Looking ahead to 2026, prices are likely to remain range-bound at the bottom:
Upward momentum is constrained by high inventories and weak demand;
Downward potential is limited as most companies operate near the break-even point, with cost lines providing strong support.
Under a neutral outlook, the average annual DMC price in 2026 may fluctuate between CNY 11,500–12,500 per ton. Should the anticipated “rush installation wave” for new energy projects materialize in the second half of the year, prices may experience a temporary rebound in Q4.
IV. China's Role: Transitioning from “Manufacturing Hub” to “Value-Added Hub”
China is not only the world's largest silicone producer but is also accelerating its shift toward the value-added end of the industry chain:
Leading enterprises such as Hesheng Silicon Industry and Xin'an Chemical are actively expanding downstream processing capabilities to enhance end-product conversion rates;
Domestic substitution is accelerating for high-end silicone rubber, specialty silicone oils, and medical-grade materials;
Countries along the Belt and Road Initiative have emerged as new export growth drivers, with polysiloxane exports reaching 546,000 tons in 2024—a 34.2% year-on-year increase.
Moving forward, China’s competitive edge in the organosilicon industry will shift beyond cost and scale, increasingly relying on technological barriers, product customization capabilities, and global service networks.
2026 marks a pivotal year as the organosilicon industry cycles through its trough and prepares for takeoff. Short-term challenges persist, yet the long-term trajectory is clear: supply-side consolidation + emerging demand + product structure upgrades will collectively propel the industry toward a new phase of healthy, sustainable growth. For enterprises with technological expertise, cost control capabilities, and a global perspective, this presents not only challenges but also significant opportunities.
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