Silicone: Worries behind Rapid Growth

Rapid consumption growth

Silicone's extensive application scope, sustained production
growth and constant technology improvements have benefited from
the rapid development of China's economy overall, and
particularly the boom in the manufacturing sector. China has
become the silicone market with the most rapid growth in the
world. The apparent consumption of polysiloxane increased from
74 thousand tons in 2001 to 260 thousand tons in 2005 with an
average annual growth of over 30%. The average annual growth of
the net imported amount was 23%. It is expected that the
consumption of polysiloxane in China will continue to increase
at an annual rate of 15%-20% during the Eleventh Five-year
Program period (2006-2010) and reach around 539 thousand tons
in 2010. China will become a major silicone consumer in the world
at that time. At a time of rapid growth in the output of major
silicone varieties, owing to innovations made over many years
China's product quality and reputation in the market have also
improved rapidly.


Fierce competition

With the completion of large monomer units constructed by China
itself, the main gap between the silicone sector in China and
the most advanced level in the world is insufficient development
of silicone downstream products. Attracted by the Chinese market,
foreign silicone companies have constructed large monomer units
in China. Domestic companies have also prepared to construct or
already constructed many silicone monomer units with
technologies introduced from abroad or developed by China itself.
By the end of 2006, more than 10 monomer projects are planned
to be launched. Jiangsu, Zhejiang, Shandong and Sichuan
provinces all have companies intending to construct monomer
units of different scales. Before 2005 it was generally held that
the capacity of silicone monomers in China would reach around
1.0 million t/a in 2010. If these projects start production on
schedule, the capacity of silicone monomers in China will be more
than 1.0 million t/a before 2008. The total output of
polysiloxane in China will likely reach 800 thousand tons in 2010,
much higher than the demand. The silicone sector in China will
be faced with unprecedented market competition. The development
of silicone downstream products with high added value will
become the key to the enhancement of market competitive edge.
   The silicone sector in China will further develop around the
following priorities in 2007.
     (1) Promote technical progress and innovation and
accelerate industrial upgrading and product portfolio
readjustment.
    (2) Promote combination and reformation between companies
and develop towards large scale.
    (3) Develop the mode of cyclic economy, highlight energy
consumption reduction and cost reduction, protect and make good
use of limited resources, advocate responsible care and pay
great attention to safety and environmental protection.
    (4) Strengthen and promote international exchange and
cooperation, raise the international reputation of the silicone
sector and enhance comprehensive competitive edge in the
international market.

Capacity and Output of Major Silicone Varieties in China in 2005
Item                Capacity (thousand t/a)     Output
(thousand tons)
Methyl chlorosilane             280     191
Heat vulcanized silicone rubber    140     100
Liquid silicone rubber           200     160
Silicone oil (100%)                30      20
Silicone resin                     16      7
Silane coupling agent           20      10
Source: CNCIC