CMSC: Organosilicon prices are expected to rebound from the bottom, and industry confidence is expected to improve.

CMSC released a research report stating that, according to Baichuan Yingfu Information, the price of organic silicon in the East China market on February 12 was 13,500 yuan/ton, an increase of 700 yuan/ton compared to the previous trading day, with a growth rate of 5.5%. Currently, mainstream organic silicon manufacturers have a strong willingness to raise prices. As the expansion cycle of the organic silicon industry ends, the market competition situation tends to stabilize, and with strong demand in both domestic and international markets, the industry's medium to long-term supply and demand relationship is expected to improve, and the business climate is expected to continue to rise. Key points from CMSC: -The expansion cycle of the organic silicon industry has ended, and leading companies have enhanced market control. -By the end of 2024, the effective production capacity of organic silicon (converted into DMC) in China was 3.35 million tons, a year-on-year increase of 26.5%, with an average annual growth of 19% since 2020. The production of organic silicon in 2024 was 2.25 million tons, a year-on-year increase of 24.8%, with an average annual growth of 15% since 2020. After the recent strong expansion cycle, there is no clear new capacity in the organic silicon industry in the coming years, and the industry's competitive landscape is stabilizing. -In 2024, due to a significant expansion of the domestic organic silicon industry, the industry's operating rate fell to 66% in September, but then began to rebound continuously, reaching 81% in January 2025 as new production capacity was effectively released. According to Baichuan Yingfu data, there are currently only 13 organic silicon production enterprises in China, and in terms of DMC capacity, Hoshine Silicon Industry, Shandong Dongyue Silicone Material, Jiangxi Xinghuo, Hubei Xingfa Chemicals Group, Zhejiang Xinan Chemical Industrial Group, and Luxi Chemical Group have capacities of 880,000 tons, 350,000 tons, 350,000 tons, 300,000 tons, 250,000 tons, and 250,000 tons respectively, with CR6 accounting for close to 70%, and leading companies continuously enhancing their market control. -Domestic demand for organic silicon is rapidly increasing, and overseas demand is flourishing. By 2024, China's apparent consumption of organic silicon was 1.82 million tons, a year-on-year increase of 21%, with an average annual growth rate of 11.2% since 2020, mainly driven by rapid growth in demand from emerging sectors such as new energy vehicles, lithium batteries, photovoltaics, and electronics. In recent years, some overseas organic silicon facilities have aged and been phased out, leading to strong demand for China's organic silicon exports. In 2024, China's organic silicon exports amounted to 546,000 tons, a year-on-year increase of 34%, with an average annual growth rate of 22.4% since 2020. Meanwhile, as China's organic silicon production capacity expands and product quality improves, the country's organic silicon imports have greatly reduced, with imports totaling 110,000 tons in 2024, a 28.4% decrease from 2020. -The medium to long-term supply and demand relationship in the industry will improve, and the business climate is expected to continue to rise. There is no new capacity in the organic silicon industry in the coming years, and downstream market demand is growing rapidly, resulting in a continuous improvement in the industry's supply and demand relationship. The concentration of the organic silicon industry on the supply side is high. According to Baichuan Yingfu information, current organic silicon manufacturers have a strong determination to raise prices, as most manufacturers have few inventories from previous deliveries, and industry production reductions and downstream inventory restocking are the trend, which is expected to drive organic silicon prices to continue to rise. The current price of organic silicon in the market is 13,500 yuan/ton, and the price has just started to rebound, still in the lower range seen in the past decade, signaling a positive outlook for the industry's business climate to continue to rise. Investment advice: Recommend focusing on leading domestic organic silicon companies such as Shandong Dongyue Silicone Material (300821.SZ), Zhejiang Xinan Chemical Industrial Group (600596.SH), Hoshine Silicon Industry (603260.SH), Hubei Xingfa Chemicals Group (600141.SH), Luxi Chemical Group (000830.SZ), and Tangshan Sanyou Chemical Industries (600409.SH). Risk warning: Rising raw material prices, insufficient downstream market demand, and the emergence of new supply in the industry.