Prices hit a new high for the year, and the market is in short supply
Recently, the domestic market for ethyl silicone oil has experienced a strong upward trend. According to the latest monitoring data from Baichuan Yingfu, as of mid July, the average price of low viscosity ethyl silicone oil (50cs) has risen to 28500 yuan per ton, an increase of 3.2% from the previous month and a cumulative increase of 12.6% from the beginning of the year; The quotation for medium viscosity products (350cs) is 35200 yuan per ton, an increase of 4.1% month on month; The high viscosity product (1000cs) set a new high of 42800 yuan per ton for the year, with a month on month increase of 5.3%.


It is worth noting that some electronic grade high-purity ethyl silicone oil quotations have exceeded the 50000 yuan per ton mark, an increase of more than 22% compared to the same period last year, and the market shows a clear supply-demand situation.


Multiple industry insiders have analyzed that the core reason for this round of price increases is the dual combination of supply side contraction and demand side volume increase. Since entering the second quarter, several major production enterprises such as Dongyue Silicon Materials, Xin'an Chemical, and Hesheng Silicon Industry have successively entered the annual maintenance period, and some production lines have even switched to high value-added modified products, resulting in a significant tightening of the supply of ordinary ethyl silicone oil in the market. At present, the domestic social inventory has dropped to about 18000 tons, the lowest level in nearly two years, and the delivery cycle of some specifications has been extended from the conventional 7 days to 15 to 20 days.


Three major downstream demand sectors are making concerted efforts
The electronic and electrical industry is the strongest engine driving demand growth in this round. With the explosive growth of AI servers and high computing power chips, the demand for electronic grade ethyl silicone oil as a key thermal conductive potting material in chip packaging has increased by over 25% year-on-year. The procurement manager of a leading packaging company revealed that the delivery time for electronic grade ethyl silicone oil has been extended from 7 days to 3 weeks, and we have to place orders two months in advance. According to the International Semiconductor Industry Association, the global consumption of silicone oil for semiconductor packaging in 2024 is about 12000 tons, a year-on-year increase of 11.4%, of which high viscosity ethyl silicone oil accounts for as much as 68.3%.


New energy vehicles are the second largest growth curve. In the first half of 2025, the domestic production of new energy vehicles will exceed 6 million units, and the demand for ethyl silicone oil for electric vehicles will increase by about 18% year-on-year. Especially in battery thermal management systems, ethyl silicone oil based thermal conductive materials are gradually replacing traditional mineral oils as the mainstream solution due to their excellent temperature resistance and insulation properties. In addition, the usage of body sealing, door frame sealing and other related processes is also continuously increasing.


The fields of building sealing and personal care provide a robust foundation. The demand for building sealants has maintained steady growth, with a year-on-year increase of about 6%; Although the market share of personal care products is only about 8%, it has become a "profit highland" for many enterprises to compete for layout due to its extremely high product added value and gross profit margin of over 40%.


Domestic substitution accelerates, ushering in a historic opportunity for the high-end market
For a long time, the high-end electronic grade ethyl silicone oil market has been monopolized by international giants such as Dow Chemical, Shinetsu Chemical, and Wacker Chemicals, with a localization rate of less than 30%. But this pattern is rapidly being rewritten.


The newly built electronic grade silicone oil production line of Runhe Materials has been officially put into operation in April this year, with a product purity of 99.99%, successfully entering the supply chain of two leading domestic chip packaging factories. The new generation of low volatile ethyl silicone oil jointly developed by Blue Star Spark Organic Silicon and the Chinese Academy of Sciences has reduced VOC content by 40% compared to imported products, and has received bulk orders from multiple daily chemical enterprises. The annual production of 10000 tons of high-end ethyl silicone oil project by Hubei Xingfa Group is expected to be completed and reach production by the end of the year, which will further alleviate the tight supply of high-end products.


Industry analysts from Xinsijie pointed out that "the technical barriers for electronic grade ethyl silicone oil are high, and China's market is highly dependent on imports. However, as more companies actively layout and break through technological bottlenecks, the industry's independent production level will continue to improve. In the next two to three years, the substitution rate of domestic ethyl silicone oil in the mid to low end market is expected to exceed 70%, and the high-end market will also increase from less than 30% to over 50%


The combination of favorable policies has propelled the industry onto the fast lane
At the national level, the "Guidelines for the Development of New Materials Industry" clearly lists high-performance organic silicon materials as a key development direction, and the cumulative investment amount of the National New Materials Industry Development Fund has exceeded 10 billion yuan. Local governments have also introduced supporting policies such as fiscal subsidies, tax reductions, and land incentives to promote the cluster development of the ethyl silicone oil industry.


At the same time, EU regulations such as REACH and RoHS have put forward higher requirements for the environmental indicators of silicone oil products. This is not only a challenge, but also a historical opportunity for domestic enterprises to achieve a turning point overtaking through greening and high-end development.


Future prospects
Overall, under the triple support of supply contraction, demand expansion, and low inventory, the price of ethyl silicone oil will continue to maintain a strong trend in the short term. However, it should be noted that if the maintenance equipment resumes production in the second half of the year, coupled with the release of new production capacity, the market may face certain downward pressure in the fourth quarter.


In the medium to long term, with the continuous investment in AI computing infrastructure and the increasing penetration rate of new energy vehicles, the market ceiling for ethyl silicone oil as a key functional material is still rising, and the industry's prosperity is expected to continue until 2026. The trend of domestic substitution of high-end silicone materials is unstoppable.