For businesses along the silicone market supply chain, the rapidly evolving industry has righted itself in capacity and demand, at least when compared to several years ago, when demand outran supply and both upstream producers and downstream customers witnessed volatile pricing.
Some of the supply problems in mid-2017 originated in Asia, considered the bellwether of the silicone market due to its ability to produce large amounts of the compound, because of regulatory shutdowns and slowdowns that lasted through 2018. This, in part, combined with other supply issues and the elastomer's rising demand across a myriad of markets, produced the imbalance.
But the apparent rebalancing of the market is in the context of a "normal" market, and current conditions are anything but normal. Many of the industries in which silicone is used — from automotive to commercial and military aviation, from medical to construction, from household goods to consumables — have been upended due to the coronavirus pandemic.
"The short answer is yes, things are pretty well balanced now," said Eric Bishop, marketing manager, North America, for Akron, Ohio-based Shin-Etsu Silicones of America Inc. "But this was prior to the coronavirus crisis. It is better than two years ago when there was a tightness of the supply chain and volatile pricing. This has pretty much resolved itself — not because demand has gone down but because capacity has increased."
While some in the industry say upstream capital investments and increased production efficiency has helped to free up capacity for the largest suppliers like Shin-Etsu, Momentive, Dow Inc., Wacker Chemie AG and Elkem Silicones Co., others have said capacity was never in doubt, especially in Asia. In some cases, according to industry professionals, the mere announcement of planned infrastructure improvements — without the capital investments ever coming to fruition — were intended only to boost the market for the short term.
Those on that side of the argument maintain that the crux of the problem was an imbalance in supply — when silicone was needed in North America, excess capacity in Europe was being shipped to Asia, where profitability was highest.
Major suppliers were unable to get silicone to the right people at the right time, and lead times for silicone and related products drastically increased.
"A lot of the constraints in Asia have been resolved, constraints that limited silicone monomer and silicon metal production," Bishop said. "Quite a few suppliers have engaged in capital investments to expand capacity, in both feedstocks as well as finished goods [silicone sheets or products themselves]."
He added that Shin-Etsu Silicones of America is in the process of building a plant to manufacture liquid silicone rubber in Akron.