Silicone Develops RapidlyConsiderable supply shortage  Silicone has excellent features in electric insulation, radiation resistance, flame retardant, corrosion resistance, high and low-temperature resistance and biological compatibility. It is extensively used in electronic/electric, construction/construction material, textile, light industry, medical, machinery, communication/transportation, plastic and rubber sectors, as well as in people's daily life. The silicone product chain can be classified into raw materials, monomers, intermediates and products.     As the demand of silicone is making a rapid growth in Asia and especially in China, almost all large silicone monomer producers in the world have been attracted by the Asian market and have already constructed or plan to construct silicone plants in Asia. The main target is the Chinese market.    The capacity of silicone monomers has made a rapid expansion in China but the self-sufficiency rate is still very low. The demand of silicone in the domestic market is increasing at an annual rate of around 30% today and the average annual growth is expected to be still maintained at more than 25% in the next 3 years. The demand of silicone products (based on monomers) will be increased from 375 000 tons in 2004 to 1.0 - 1.2 million tons in 2010. The demand growth will mainly come from construction, electronic and daily-use chemical sectors. The supply shortage of silicone monomers in China was around 330 000 tons in 2005 and the self-sufficiency rate was only around 33%. Major producers are planning to make further capacity expansion. Based on the demand growth trend and the capacity expansion plan, however, the market supply shortage will still reach 410 000 tons in 2007 and the self-sufficiency rate will only be 46%.      The technology gap between China and foreign countries is narrowing. The technical bottleneck in the silicone monomer production lies in how to ensure the stability of product quality and how to expand the single-unit scale of production units.    The single-unit scale of silicone monomer units in large foreign companies is usually more than 50 000 - 100 000 t/a and the greatest single-unit scale can reach 200 000 t/a. The single-unit scale of silicone monomer units is also developing rapidly in China. Xinghuo Silicone Plant of Blue Star Chemical New Material Co., Ltd. will complete a 100 000 t/a silicone monomer unit in 2006. Zhejiang Xinan Chemical Industrial Group Co., Ltd. also plans to construct a 100 000 t/a silicone monomer unit in 2007.    The silicone sector in China enjoys the support from the state policies. Silicone is included in the new materials of the “Directory of High-Tech Products Encouraging Foreign Investment (2003)” jointly issued by the Ministry of Science and Technology and the Ministry of Commerce in 2003. Silicone is regarded by the state as a sector whose development is actively encouraged.    The Ministry of Commerce made a preliminary ruling on September 29th, 2005, deciding to take temporary antidumping measures to the import of dimethyl cyclosioxane in primary form originated from Japan, the United States, Britain and Germany. (CCR2005, No. 30) It is evident that the silicone sector in China is being protected by industrial policies. Cost and market advantageMajor raw materials for silicone are metal silicon powder and monochloromethane. China has advantages in cost and resources in these two important sectors.    China is a major metal silicon producer in the world with a capacity of around 770 000 t/a today. The annual output of industrial silicon has been maintained at more than 400 000 tons since 2000, accounting for around one third of the world total. The annual export amount exceeds 300 000 tons.    The huge metal silicon capacity and the low market concentration in China are favorable to the development of the silicone industry. Xinan Chemical Industrial Group Co., Ltd. and BlueStar Chemical New Material Co., Ltd., the two major silicone producers in China, have gained a capacity of over 50 000 t/a metal silicon respectively in Sichuan province and Lanzhou, Gansu province and plan to conduct further capacity expansion.    Major silicone producers in China can basically produce monochloromethane by themselves. Monochloromethane in China has rich resources and stable price.    The rapid development of downstream sectors has promoted the demand briskness of upstream products. The consumption of silicone monomers is mainly concentrated in silicone rubber and silicone oil sectors. The market demand of silicone in China is making a rapid growth. Silicone has an opportunity of rapid development in its major application sectors such as silicone rubber, silicone oil and silane coupling agent.    Silicone rubber: The demand of special rubbers will continue to be brisk in China. Silicone rubber has excellent biological compatibility and can be processed into various products such as profiles, tubes, strips, rolls and fabrics. It is mainly used in construction, automobile, electronic/electric and medical beautification sectors.    China produced more than 2.1 million tons of various rubbers in 2005. The output of natural rubber was around 560 000 tons and the output of synthetic rubber was around 1.632 million tons. The consumption of synthetic rubber in China was more than 2.5 million tons in 2005. Due to the insufficient output, great quantities of synthetic rubber, high-quality and special varieties in particular, have to be imported from abroad. It is expected that the rubber consumption in China will maintain sustained growth for a considerable period of time in future.    Silicone oil: The demand of silicone oil has made a constant increase with the economic growth. Silicone oil has many application sectors. The consumption in daily-use chemical products accounts for 30 - 35% of the total. It can also be used as processing assistant such as de-foaming agent, mold-release agent and surfactant. With the growth of the national economy, the demand of silicone oil in China will have a constant increase and the proportion of high-grade varieties will have a drastic upgrading.    Silane coupling agent: The demand of silane coupling agent has made a rapid increase with the capacity expansion of fiberglass and radial tires. Silane coupling agent is mainly used to improve the mechanical property of fiberglass. The consumption of silane coupling agent in fiberglass accounts for around a half of the total. It is also used in radial tires and the consumption in this sector accounts for more than 40% of the total. The balance is used in other consumption sectors such as coatings.    The fiberglass sector is at a stage of growth in China and the output is increasing at an annual rate of over 3%. With the increasing proportion of radial tires and the capacity expansion of fiberglass and radial tires, the demand of silane coupling agent in China will have a constant increase. Sustained high profit-earning abilityThe high technical barrier in the silicone monomer production has led to high capacity concentration in the world. The concentration of silicone monomers in China will still be maintained at a high level in the next few years. The capacity of silicone monomers is mainly concentrated in Zhejiang Xinan Chemical Industrial Group Co., Ltd. and BlueStar Chemical New Material Co., Ltd. The great complexity in the silicone production will effectively prevent new comers from entering the sector.    Antidumping activities will help maintain the high import price of silicone monomers. The self-sufficiency rate of silicon